Here’s How To Take A Millionaire By Saving $ 500 Per Month

0

Many people plan to retire with $ 1 million or more in savings. And the reality is that reaching that goal may be more doable than you realize.

Now I know what you are probably thinking, “Sure, I can retire a millionaire if I’m willing to spend half my salary. But the good news is, you don’t have to part with a heap of money on a monthly basis to achieve millionaire status. In fact, it is possible to achieve this by saving $ 500 per month.

Image source: Getty Images.

Start early and invest wisely

Let’s put one thing aside: if you don’t start saving for retirement until you’re in your 40s or 50s, then $ 500 a month won’t be enough if you hope to end up with $ 1 million or more. Likewise, if you play too cautiously in your IRA or 401 (k) plan and invest primarily in bonds, you may not be generating high enough returns on your account to grow your balance in the millions.

On the contrary, if you want to become a millionaire with $ 500 per month, you will need to start funding your retirement savings at an early age and investing your savings aggressively. This means stocking up on stocks, which have historically generated much higher returns than bonds.

Now, if you can’t pick individual stocks, which is usually the case if you’re saving in a 401 (k), or if you don’t know how to hand pick stocks, don’t worry. You can instead fall back on index funds.

When you buy index funds, you own a set of stocks with one investment. In reality, S&P 500 Index Funds are a particularly interesting bet because they give you exposure to the wider stock market without requiring you to do a lot of research. And because index funds charge very low fees, they won’t eat into your returns too much.

Run numbers

Let’s say you start funding a retirement plan at age 25 and plan to retire at age 70. That gives you 45 years to contribute, and at $ 500 per month, you’re talking about putting a total of $ 270,000 in your IRA. or 401 (k).

Let’s also assume that you go for S&P 500 stocks or index funds and as such your investments generate an average annual return of 8%. That’s a bit below the stock market average, and that performance explains both stellar years and corrections / recessions.

Based on the timing of your contributions and our estimated return, your ending savings balance will be just over $ 2.3 million. It also means that you envision a gain of over $ 2 million in your retirement plan. And it’s pretty cute.

An easier road than you think

The longer you wait to start saving for retirement, the more money you will have to give up each month to become a millionaire. But if you save from a young age and invest in smart fashion, you might be surprised at how easy it is to end your career with $ 1 million or more.

Of course, not everyone needs millions to comfortably retire, so if you’re already in your 40s or 50s and haven’t started saving for your retirement yet, don’t despair. At the same time, get moving. You still have time to build wealth at this point, so the key is to get started as soon as you can.


Source link

Share.

Comments are closed.