How Can You Save $1 Million For Your Retirement?

At 25, retirement may seem eons away; something that does not deserve any time or effort on your part. Wrong! This is the right time to begin thinking about retirement- if you want to live comfortably during retirement. Too many people leave the retirement plans for “later,” only to wake up with next to nothing on the eve of their retirement. If done early enough, planning correctly can enable you to retire from your job even earlier than projected. Here are a few tips that will help you achieve your targeted retirement savings amount:

1. Start Your Retirement Plan with 401(k)/ IRA

As soon as you get a job, contribute to your company 401(k) plan so you can take full advantage of your employer’s matching contributions program. Go for the maximum permitted contribution; motivate yourself by imagining your money instantly doubling with each matching deposit from your employer.

If you do not have a job or your company does not offer a retirement plan, do not wait until you get hired by a company that does. Instead, fund an IRA account privately, through your financial institution, and start building your retirement nest egg as early as you can.

Even minimal contributions, made consistently over time, can add up to big savings when we consider that contributions will be made over approximately 40 years; and that those contributions will accrue interest while invested. Along with weekly or monthly contributions, you should consider making lump sum contributions, whenever possible, to reach the maximum contribution cap each year.

2. Go for Stock Options

The best way to have your money work for you is through stock options. Find a financial professional that handles mutual funds (they carry the lowest risk) and invest all your funds (earmarked for savings) in stock. Bonds are also good (and safe) but they are best reserved for when you are investing for less than 10 years. Anything beyond, and you cheat yourself out of generous profits by playing for quick gains.

3. Keep a Close Eye on High-Interest Debts

What would you say if someone threw away $3 every time they spent $10; maybe it does not seem like much when you are looking at a rather small amount of $10. However, what if the amount is multiplied to $1,000? And what they were throwing away was $300; or $10,000 and the amount we are referring to is $3,000, simply thrown away? We could all agree that the person is insane- when you look at it as a lump sum. The problem is- consumers do this every day as a slight trickle- when they use credit. You are probably doing this as we speak, unintentionally.

How you ask? This is exactly what you are doing when you have a rolling balance on credit cards. You are paying at least 3% per month compound interest; that means by the end of the year you would be paying more than 40% on whatever money you have borrowed. This money is essentially thrown away; your hard earned money given to a wealthy financial institution. Does this really make sense? Shouldn’t you have the privilege of enjoying every dollar you earn?

Therefore, you need to keep a very close eye on credit cards and other high-interest debts. The best option is to stay within your means and use credit cards only in dire emergencies. If you can’t pay for it immediately find a way around “wants,” and stick to “needs.”

4. Set Up an Emergency Fund for a Rainy Day

What if you lose your job tomorrow and are unable to get one for about 3-6 months? How would you manage? What if your job derails from its current success or suffers heavy losses and is forced to downsize? What would you do for money? What if you have an accident or sudden illness and you cannot work for a few months? There are many “what ifs” in life; you cannot prevent most of them, but you can be ready to face them.

Set up an emergency fund preferably using an online bank because these banks offer higher interest rates on savings accounts than contemporary banks. Your savings should equate to 6-12 months of earnings. You should be strict with adding funds to this savings account and even stricter with not taking any money out.

Following these steps, it is very possible to enter retirement with a million dollars in savings. That money can be reinvested in part and change the remainder of your life along with the lives of your family. Following these steps will also allow you to retire when you choose. You will be able to enjoy the remainder of your life without financial headaches or placing financial burdens on your loved ones.

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