You want to retire a millionaire. However, some financial experts are saying having a million dollars saved the day you get the gold watch may not be enough.
For a whole swath of middle- and upper-middle-class Americans, seven-figure savings may soon be routine. They will also be essential.
If you had $25,000 15 years ago, had been reasonably diligent about keeping that money invested and adding to it through a 401(k) plan, and then avoided the worst of the past couple of years, turning the $25,000 into $300,000 would have required returns of only about 60 percent of what the stock market delivered during that time.
So how do you take the leap from $300,000 to $1 million? Or maybe just $30,000 to $100,000? What should would-be millionaires worry about? Here are some surprising tips for planning your retirement:
- To become a millionaire, do nothing. At least, do nothing differently. Whatever strategy has been working for you so far is a successful one-after all, it's been working for you so far-so your best bet may well be to keep doing it.
- Don't diversify. Financial planners say diversification more often lowers your return than raises it. While it's probably a bad idea to put all your nest eggs in one basket, a concentrated fund, or a relatively small portfolio of stocks and notes if you're investing on your own, is probably a better way to go.
- You only need five percent to make your money last forever. Paying yourself five percent of a million dollar endowment annually gives you a comfortable $50,000 per year. As long as your return is more than five percent, you can be confident the money will be there.
- Retirement won't be cheap. The idea that retirees live on less is predicated on you living out your days in a rocking chair. Senior citizens' discounts are offered for a reason. And if you're now making more than the $50,000 mentioned above, you're going to have to make some lifestyle changes when you retire.
- You're never too rich to save. Even if you've got $500,000 squirreled away, you're 40 and you're planning to work another 20 years, you still need to save.
Smart investment decisions are key to a comfortable retirement.
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