Start Investing by 26, Retire a Millionaire by 67
At any rate, I came across a link for the Motley Fool in my inbox the other day, and think you might enjoy it. It's one of those "million dollar calculation" type articles, which are always fascinating to me - especially considering i'm working on my OWN millionaire plan!
The stats, themselves, never change of course, but the way people write about them sure do. This particular article states that if you do the following ONE TIME ONLY in a year, you could be ritch b*tch! (in the voice of dave chappelle on james brown):
- Max out your 401k contributions for the year
- Max out your IRA contributions for the year
- Earn historical average returns of 10%
- And do so by the age of 26.
You will become a millionaire by the time you retire!
Sexy, right? Sure thing, but as cool as it sounds (anything to do with a million dollars is cool to me!), it's not as simple or easy to do. A lot of the variables are discussed in the article, but to reach the above, for example, it means you'd have to come up with that initial $20,500! Y-I-K-E-S.
Compound interest is your friend, but it sure doesn't perform miracles ;) Plus, there's the whole "inflation" stuff, but that's another story. The Fool also adds:
In order for most 26-year-olds to save $20,500 in a single year, they'd either
need to find a fabulously high-paying job or a rent-free room in their parents'
basement. Either way, they'd probably be living on a strict diet of ramen
noodles.
Haha...agreed. Of course, saving a butt-load early on is killer for any goals you might have. Just because you can't be superman and invest a huge lump sum like that, by all means keep plopping those dollars into your account!
And if your goal is to indeed reach that $1 million dollar mark, then create your own plan and stick to it (I used this millionaire calculator to get started on my personal goal). You'll be that much closer either way you look at it.
And be sure to holler back too so we can track your progress and learn :)
Labels: 401k, Ira, retirement
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posted by J. Money at
11:22 AM
7 Comments:
Thanks for the link on how you started your millionarie plan. I really need to create a long-term plan and I'm going to use this tool.
J,
One thing for your readers to consider...many on-line calculators do not account for inflation. Since the CPI is running at like 3-4 % this year people should definetly consider the impact that inflation will have on their long term earning power.
Best,
James
I think you sidestepped the point of the article - which is "Do this ONE time and you will be a millionaire". I didn't catch that until I clicked through and read the article.
Glad i could help asgreen :)
James - Yeah man, totally. I tend to avoid that part, though, because there are just too many variables that come in play. I like to give people a general sense of the "million dollar" concept. I did throw in a little somethin' somethin' about it though when i revised the post ;)
Anon - THANK YOU! Wow, i seriously misread that one...makes even more sense now ;) I have updated the post accordingly, and apparently need even MORE coffee! haha.
I just had to say that I love your personal finance blog! When I first started reading you a couple months ago, I was inspired to start my own pf blog, and now I'm addicted. Thanks! :)
As always, another great post. These kinds of posts just reiterate how important it is to save often and save early. Great reminder, thanks!
Deployed soldiers are another in the group who could actually save that in a year. I should know, my husband is deployed and we are agressively saving. Our goal is between 35k-40k.
Unfortunately 30k of it is already marked to go places. 2 cars(we need,ours is on its last leg), next year in college, lasik, a nice vacation (he deserves!) and some smaller things.
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