Approximately 233,000 Americans have at least $1 million stashed in their 401(k) accounts, according to a report from Fidelity Investments.
If your goal is to join that exclusive club, you’ll need to have a strategy in place. Reaching millionaire status by retirement isn’t easy, but it is an achievable goal if you’re willing to work for it. Here are three signs you’re already on pace to retire a millionaire.
1. You’ve set savings goals (and you stick to them)
It’s one thing to set a goal of reaching $1 million in savings by the time you retire, but it’s another to set weekly or monthly targets along the way to ensure you’re able to reach your overarching goal.
To figure out how much you should be saving each week or month, run your numbers through a compound interest calculator.
You’ll need to know what age you plan to retire as well as the rate of return you’re earning on your investments, and from there you can play around with the numbers to see how much you’d need to save each month to reach $1 million by retirement age.
2. You’ve been saving consistently for years
To reach the $1 million mark, it’s not enough to save every so often; you’ll need to save consistently for decades.
Saving for retirement is playing the long game, and your investments need plenty of time to grow. For example, let’s say you want to have $1 million saved by age 65, and you’re earning a 7% annual rate of return on your investments. Here’s how much you’d have to save each month to reach that goal, depending on what age you began saving:
Stashing $1 million in your retirement fund isn’t something that can be achieved overnight, or even within a year or two. So the earlier in life you begin saving, the better chance you have of reaching this goal.
3. You’re willing to make financial sacrifices to save more
Even if you haven’t set savings goals or started saving in your 20s, that doesn’t necessarily mean you can’t retire a millionaire. One of the most important signs that you have what it takes to save $1 million is your willingness to make sacrifices to boost your savings.
If you’re behind on your savings, first calculate how much you should be saving each month to retire with $1 million in savings. Next, begin tracking your spending so you know exactly where every dollar is going every month. Finally, start making budget cuts, eliminating any unnecessary expenses and stashing that extra cash in your retirement fund instead. Depending on how much you need to save, these cuts may be substantial. But if you’re determined to retire a millionaire, they may be worth it.
Is $1 million the right goal for you?
Although retiring with $1 million in savings may sound like a good target, it’s not the right goal for everyone. Some people may be able to retire comfortably with less than that, while others may need far more than $1 million just to make ends meet.
Rather than aiming for an arbitrary number, plug your information into a retirement calculator to determine how much you should save based on your unique situation. Your retirement is unique, so your savings goal should be unique, too.
No matter your savings goal, it’s still wise to set monthly savings targets, save consistently, and be willing to make financial sacrifices. Just be sure your goals are based on your individual situation, and you’ll give yourself the best shot at enjoying a comfortable retirement.
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Source: The Motley Fool