By Sharon, Your Safe Money Lady™

Licensed Mortgage Broker, Certified Professional Retirement Planning Adviser, and Financial Advocate

Retirement may seem like a distant dream, especially if you're in your 30s or 40s, but the truth is, the sooner you start planning, the more comfortable your retirement will be. Saving $1 million, or even $2 million, might sound daunting, but with a clear plan and disciplined approach, it's entirely achievable. Here’s how to set yourself up for success.

1. Understand Your Retirement Goals

Before diving into the numbers, it’s crucial to define what a comfortable retirement looks like for you. Do you envision traveling the world, or do you plan to stay close to family? Understanding your lifestyle goals will help you estimate how much you'll need. A rule of thumb is to aim for a retirement income that’s 70-80% of your pre-retirement salary. But remember, this can vary greatly depending on your lifestyle choices.

2. Start Early and Invest Wisely

Time is your greatest ally when saving for retirement. The earlier you start, the more you can leverage the power of compound interest. For example, if you start saving $500 a month at age 25 with an average annual return of 7%, you could have over $1.2 million by age 65. Starting just 10 years later at 35 could reduce that total to around $600,000.

Maximize Employer-Sponsored Retirement Plans

If your employer offers a 401(k) plan, make sure you contribute enough to take full advantage of any employer match. This is essentially free money and can significantly boost your retirement savings.

Consider IRAs and Roth IRAs

In addition to your 401(k), Individual Retirement Accounts (IRAs) offer another tax-advantaged way to save. Traditional IRAs provide tax deductions now, while Roth IRAs offer tax-free withdrawals in retirement. Depending on your current tax situation, one might be more advantageous than the other.

3. Calculate How Much You Need to Save Monthly

Let’s break down the numbers. If you’re 30 years old and want to retire with $2 million at age 65, assuming an average annual return of 7%, you’ll need to save approximately $1,090 per month. Adjust this amount if you’re starting at a different age or aiming for a different retirement sum.

Here’s a simplified guide based on starting at age 30:

• To reach $1 million: Save about $550 per month.

• To reach $2 million: Save about $1,090 per month.

If you start later, these amounts will increase. Conversely, starting earlier reduces the monthly burden.

4. Live Below Your Means

This might be the most challenging step, but it’s also the most crucial. The more you can save and invest, the faster your money will grow. This doesn’t mean you need to deprive yourself of all pleasures, but it does mean making conscious spending decisions. Track your expenses, create a budget, and identify areas where you can cut back.

5. Increase Contributions Over Time

As your salary increases, so should your retirement contributions. Aim to boost your savings rate by 1-2% each year or with every raise. This gradual increase can make a significant difference without drastically impacting your current lifestyle.

6. Invest in a Diversified Portfolio

Diversification is key to managing risk while still aiming for growth. A mix of stocks, bonds, and other assets tailored to your risk tolerance and time horizon can help protect your savings from market volatility.

• In your 30s and 40s: Focus on growth through equities. Consider investing heavily in stocks, as they generally offer higher returns over the long term.

• In your 50s and 60s: Gradually shift to a more conservative portfolio with a higher allocation in bonds to protect against market downturns as you approach retirement.

7. Avoid Common Pitfalls

• Don’t Cash Out Early: Withdrawing from your retirement accounts early not only diminishes your future savings but also subjects you to penalties and taxes.

• Beware of High Fees: Investment fees, even seemingly small ones, can erode your savings over time. Opt for low-cost index funds or ETFs when possible.

• Stay the Course: Market fluctuations can be unsettling, but it’s essential to remain focused on your long-term goals. Avoid panic-selling during downturns; instead, consider market dips as opportunities to buy at lower prices.

8. Consider Additional Income Streams

If saving the required amount seems challenging, look into additional income streams such as side gigs, rental properties, or freelance work. Any extra income can be funneled directly into your retirement savings.

9. Regularly Review and Adjust Your Plan

Life changes, and so should your retirement plan. Review your progress annually and adjust your savings rate, investment strategy, and retirement goals as needed. Consider working with a financial adviser to stay on track.

10. Plan for Healthcare Costs

Healthcare is one of the largest expenses in retirement. Consider long-term care insurance and start a Health Savings Account (HSA) if eligible. HSAs offer a triple tax advantage: contributions are tax-deductible, grow tax-free, and withdrawals for medical expenses are tax-free.

Start Now, Reap the Benefits Later

Saving $1 million or $2 million for retirement is a realistic goal if you start early, stay disciplined, and make informed financial decisions. Remember, the journey to a comfortable retirement is a marathon, not a sprint. By following these strategies, you can ensure that you’re well-prepared to enjoy your golden years without financial worries.

If you’re ready to take the next step, or if you need personalized advice on your retirement plan, don’t hesitate to reach out. I’m here to help you navigate the complexities of retirement planning and ensure you’re on track to meet your goals.

Warm regards,

Sharon, Your Safe Money Lady™

Sharon Ben-David

Phone: (954) 261-5200
Licensed Mortgage Broker, Certified Professional Retirement Planning Adviser, and Financial Advocate

Protecting Your Nest Egg, Inc.

NMLS #2308601