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FINANCIAL SECURITY:
HOW TO RETIRE WITH A MILLION IN THE BANK. |
D.N. Gibsonett Denver,
CO |
This is one of the first things your parents should teach you right after you learn to count on your fingers and toes. I call it the 8th wonder of the world, Compound Interest. IF, when you turned 18 you were to put $1 a day toward your retirement, do you think you could retire with the life style you wanted? $1 a day from age 18 to age 65 would be a total investment of $16,790. Not enough to retire on! But if you invested that $1 a day, $30 a month, in Equity Oriented Mutual funds from age 18 to 65. And you averaged 15% (not impossible with a little work) That same $16,790 would grow in to over 2 million dollars. The magic of compound interest! |
FEEDBACK: Most 18 year-olds arn't bright enough to read this web site. If you are 30, and you want to retire with the same $2,000,000 you would need to invest $140 a month at 15% interest. If you are 40 you would need to put away $650. If you wait until you are 50 you would need to come up with $3,000 a month. for the same results. In any case the principle is the same. Get rich slow. Save what you earn. NE, Danforth, IL
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N.S.
Williams
Baltimore,
MD
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I can do you one better on the compound interest route to riches. If, the day you were born, someone put $1 a day into a box for you, at age 65 you would have about $25,000 in the box. Had that same $1 a day were put into a pass book account that paid 3%, at the end of the same 65 years you would have $75,000. At 5 % interest, your $1 a day would have grown to almost $200,000. Now we are beginning to talk about real money. If an investment of 10% was utilized, your $1 a day would grow into a staggering $2.75 million. Now lets dream, at 15% your $1 a day would grow to $50 million and if you could some how receive 20% your $1 a day would grow and grow and grow in to an unbelievable one Billion dollars. That is why the wealthiest families in America founded their own banks. Slow and steady wins the race. |
FEEDBACK: If at age 21, you put $166 a month ($2,000 a year) in to an IRA that earned a moderate 10%. And for some reason you stopped contributing at age 27, you only contributed for 6 years, at age 65 you would have $1,000,000. The IRA is one of the most underated wealth builders in America. The truth is that companies don't encourage their employees to invest in IRA's because they want to keep them financially dependent upon their paychecks. DR, Philadelphia, PA
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H.G.
Windsor
Dallas,
TX
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Americans are obsessed with becoming millionaires. Do a search on Amazon.com and you will find over 1,370 books with "Millionaire" in the title. Take a look at some of the most popular television shows over the past few years: Survivor (competing for $1 million), Who Wants to Be a Millionaire, Joe Millionaire and Deal or No Deal ($1 million prize). How many lotteries have a one million dollar prize? The truth of the matter is that a million dollars doesn't buy as much as it used to and there are more than a million millionaires in the U.S. alone. We need to reconsider this drive to amass wealth and start to think about what it takes to create something of value. Like this website for instance. I don't know what the people who created it had in mind but i have found that just the idea of putting the answers to questions most people want to know is a really useful idea. I have read almost every page on this site and feel a lot smarter for the experience. I hope they get their million to retire on. |
| FEEDBACK: Actually a million bucks isn't that much once you take inflation into account, being a millionaire today isn't as impressive as it used to be. For example, if someone was a millionaire in 1980, they would have to have about $1.9 million dollars in 2003 to match the wealth they had in 1980.G.R. Wilmington, DL |
G.H.
Newcomb
Racine,
WI
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It is necessary to have enough money working for you or a wealth-generating system working for you if you decide to stop working. If one looks at the principle of money at work, one million doesn't seem like much. Since you shouldn't wish to spend it all, it would only amount to a little over $8,000.00 per month, assuming an effective interest rate of 10% per annum. If you spend from the principal, then there'd be even less income generated on a monthly basis. If you are planning to retire in twenty years, a target of one million may certainly be necessary. However, in present terms a million dollars is not necessarily a prerequisite for a comfortable retirement. How you manage the resources you have may ultimately be more important than the actual resources that you have. Should you have next to nothing to work with; this would hardly apply to you. What matters most for retirees is their liquidity ratio and whether it is likely to increase or decrease. |
| FEEDBACK: If your financial plan is in disarray at retirement, or any other stage of your life for that matter, one million in cash may not even be enough for you. Medical expenses and other unforeseen events can erase large sums of money quickly. If you do not have sufficient protection products, then a million dollars may be barely enough to insure yourself against risk. XK, Tulsa,OK |
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EXPERT OPINIONS |
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Saving a million is not that hard. For example, a 30-year |
old making $50,000 a year (plus 3% raises each year), saving 10% of their income with a 10% return each year could expect to hit millionaire status at age 59. If they work until the traditional retirement age of 65, they will have over two million dollars saved up. Financial independence is a matter of descipline and perserverance.Surprisingly, income is not as big a factor as you might think. No wonder Einstein called the the power of compounding interest. the "8th wonder of the world":
Dennis McKinley
Financial Consultant
St. Louis, MO
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Do You Have What it Takes to Become a Millionaire?
Most do not, |
As you have learned the most important factor to becoming a millionaire is to save early and rely on compounding interest. You can easily have control over how much you save, but you can't do much about performance - performance isn't reliable. You could try to make 15% a year, but may end up losing 10% a year doing so. It is better to rely on a properly diversified mutual fund portfolio earning around 10-13% a year, then to gamble and never retire.
Dorothy Gallup
Banker
Quincy, MA
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Is One Million Dollars Enough to Retire On? It is. If you |
| Is One Million Dollars Enough to Retire On? It is. If you had one million dollars today and put the money in something safe that earns around 6% a year, you could afford to take out $60,000 a year for the next 49 years. If you wanted to be a bit more aggressive with your withdrawals and live up your retirement years, you could take out $100,000 a year for 14 years. For simplicity, these examples don't includes taxes which would decrease your lasting power, though things like social security and higher returns would increase your lasting power.
Mary Bartholomew
CPA
Harrisburg, PA
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There are ways
that the U.S.
government can help you Become a Millionaire. |
Contributions to your 401(k), 403(b), 457, SEP, IRA or any other employer-sponsored plan are tax-deductible (except IRAs if you earn too much income) and lower your overall tax liability each year you invest. Since dividends and capital gains are also not taxed each year, your account grows faster. Another advantage of a 401(k) or other employer-sponsored retirement plan is that there is often some kind of employer match. That is free money to you, not unlike giving you a raise, but usually you must invest your own money to get your employer's match.
Rosco Benson
Financial Consultant
Beaverton, OR |
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Unfortunately, reaching your wealth target is only half the battle
Once you've |
accumulated enough capital to retire, you still need to make sure it'll last as long as you do. The rule of thumb when it comes to withdrawals is that you can spend 4% of your retirement savings per year. History indicates that your cash will very likely last at least 30 years if you follow this tack, no matter what the market does.The most straightforward way to put that 4% in your pocket is to buy companies like Citicorp
and Pfizer
that'll hand it to you in cash dividends simply for owning their shares.
Harold Fuller
Mortgage Banker
Racine, WI
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Whether you're a young, whipper-
snapper just starting |
out or a seasoned veteran staring a retirement date in the face, your retirement is the biggest financial milestone of your life. To properly prepare for and master that time of your life, you need to start building and working against your plan now.To help you start down a successful path to and through retirement, take the next 30 days to try us out at Motley Fool Rule Your Retirement, free of charge. Once you discover how powerful an effect a bit of planning today can have on your ability to combat the ravages of inflation after you've left the workforce, you'll be glad you did.
Daphne Johnson
Financial Planner
Newport Beach, CA
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David Nash ,
Financial Analyst
Fantazzzmia |
| A million dollars has long been the retirement portfolio gold standard, and why not? That's a rich sum. But let's get the bad news out of the way quickly. If you earn six figures and have no intention of living on an austerity budget when you stop working, you may need far more than $1 million to support yourself for the rest of your life.
The reason $1 million isn't all it was once cracked up to be: As a rule of thumb, you should plan to withdraw no more than 4% of your portfolio in your first year of retirement - otherwise you risk running out of money too soon.
You can nudge up your withdrawals slightly each year for inflation. So if you want an annual income of $80,000 - the retirement inflow needed to maintain the lifestyle of a worker earning $100,000 - and you and your spouse will collect $20,000 or so a year in Social Security benefits, $60,000 will have to come from your own savings. At a 4% withdrawal rate, that works out to a nest egg of roughly $1.5 million.
Of course, that's just a ballpark figure. With a pension or part-time work or more modest expectations, you can get by with much less than seven figures. The only number that really counts is the number you personally need to save based on your goals and resources. So start figuring. Use the savings calculator to the right to find out whether you're on track.
Update these calculations every few years or whenever you have a major lifestyle upgrade. As you draw closer to the finish line, this exercise will give you an increasingly accurate picture of your target, million dollars or not. |
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