SAVING up enough money for retirement could be challenging for some – but it can be done if you contribute a little each day.
To retire comfortably, many think they’ll need to become at least a millionaire by the time they stop working.
For some, this might seem overwhelming – especially to those who are just entering their careers and have other major expenses to take care of.
How to start
The easiest way to put it is the earlier you start the better, as also noted by money expert Tiffany “The Budgetnista” Aliche.
She’s written in a blog post: “Your 20s is a great time to start because this is the time in your life when you can afford to put away a large chunk of your income.
Moreover, Larry Gatz, president of Copperwood Financial told the Sun last month that “the key is to start with something,” even it’s only $50 or $100 a month.
Once you’re ready to start, open a Roth individual retirement account (IRA) with a brokerage.
Some brokerages that offer IRA services include Fidelity, TD Ameritrade, and Merrill Edge.
Under a Roth IRA, you pay taxes on the money you put into it. However, your earnings on the investment are tax-free.
But keep in mind, you’ll have to choose your own investments once you open an account and want to start saving money.
And know, like with every investment – you are never guaranteed to make a profit. In fact – the value of your assets can actually fall.
Recently, we’ve broken down some ways for amateur investors to get started, with safe bets typically index funds and mutual funds.
Both of these contain multiple holdings, whereas individual stocks are typically about one company.
When looking at those types of funds, always consider the average annual return and the companies in their holdings to make the best decisions.
Roth IRAs have historically averaged between 7% and 10% a year in returns, but be aware this depends on your investments and risk tolerance.
How to become a millionaire in your 60s
How to become a millionaire depends on the age you start, how much you save, and the return you average.
Let’s assume you’re 30, and realistically say you earn on average 8% each year in returns from your Roth IRA.
Also, let’s assume you put in the maximum per year into your Roth IRA, which is $6,000 for adults under 50.
By the time you hit 65, you’ll have roughly $1.2million.
The best part about that is you only invested $216,000 and experienced a profit of nearly $1million.
If you instead started five years earlier at the age of 25, your Roth IRA would be worth $1.5million by the time you hit 65.
To do this, you’ll need to save about $16 a day, or $115 per week.
To maximize your retirement earnings, it’s important to start as early as possible.
To calculate how much your own Roth IRA pot will be worth in future, check out a calculator by comparison site NerdWallet.
You’ll need to enter your age, rate of return, annual contribution, as well as retirement age.
Other handy retirement accounts
It’s important to make sure you take advantage of every tool at your disposal when it comes to retirement.
This includes setting up a 401k account if your employer offers it.
Those plans allow employees to allocate a portion of their income into a long-term investment account.
You’ll have to check with your employer, but some companies will agree to match up to 5% of each paycheck.
And you should never say no to free money.
