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How to Retire as a Millionaire

Ready to become a million-dollar retiree?

Who would not want to become one?

From a recent survey conducted by Time Magazine, 1 of every 3 Americans has saved practically nothing for their retirement. And a surprising 23% of Americans -- almost a fourth -- have saved less than $10,000.

In short, a total of 56% of all Americans have saved below $10,000 for their retirement. That should be cause for great concern.

Moreover, 42% of millennials (people aged 18 to 35), unfortunately, have not started saving for retirement.

It seems that this generation is bound to commit the same mistakes that their parents and grandparents, in general, committed.

But there is hope! Building a million-dollar retirement fund is not too difficult to accomplish. With enough discipline and by following these three simple steps, anyone can be assured of a secure future.

The benefit of following these effective guidelines, aside from obtaining a million-dollar retirement fund, is that you can reach your goal earlier by seven years. Yes, that is an additional solid seven years of retiring earlier than expected to allow you to fulfill your dream of buying that vacation home, travelling around the world or just enjoying your life in the peace and comfort of your home.

If you believe that plan is for you, begin the journey this very day.

If you still have doubts as to the reliability of this claim or if you think that you will need a CEO’s salary or, perhaps, have to risk your very life to achieve that big a nest egg, you are gravely mistaken.

In reality, all you need is a salary of about $60,000 yearly in order to create a million-dollar retirement.

How? Follow the steps below:

STEP 1 – Commit a part of your yearly income into savings.

That easy! Do not follow the crowd headed for the precipice of unsecured retirement – that crowd that is about half of whom are millennials.

Planning to save a reasonable part of your salary is the initial step to attaining your niche in the millionaires’ club. Every giant undertaking starts with a small step. Trust the experiences of so many before you; unless you commit to this plan, you are most likely to lose the opportunity of gaining a million-dollar retirement fund in the future.

With your yearly $60,000 income, setting aside $5,500 or about 9% of your gross income for your retirement gets you through the initial and crucial step. Congratulate yourself for doing this!

Doing so, you would have saved $458 monthly. The best strategy is to set up an automatic draft payment which allows you to transfer your funds from a checking account toward an investment account. That will help you sustain your objective of achieving a million-dollar retirement fund.

STEP 2 — Set up a tax-advantaged Individual Retirement Account (IRA).

Get hold of this free and easy approach which allows you to trade in and out of investment securities with minimal costs. Majority of transactions will be cheaper than your favorite cup of latte at the coffee shop. Sometimes, commissions are even disregarded. Open up an IRA today if you still do not have one.

An IRA provides a viable investment instrument for creating wealth due to its deferred capital-gains tax as well as its tax-deductible annual contributions. In short, the government practically helps you become a millionaire while minimizing your income-tax expenses. At present, the minimum IRA yearly contribution is $5,500 annually ($6,500 for 50 or older individuals), right within your ballpark.

You can also make contributions on a lump-sum basis or at regular periods. The latter is a great option for leveling out fluctuations in the investment portfolio, since prices tend to become volatile within the year. The outcome will be what is called “dollar-cost averaging” of your contributions. This strategy reduces the emotional stress in your decisions with respect to your savings.

Two down and only one more to go! You may celebrate at this point.

To show you clearly what happens: Simply investing $5,500 yearly for 30 years, or a total of $165,000 principal investment, will earn you $1,036,000 in the end.

This “miracle” is possible through the compounding power of money, since compounding can generate returns, which are then invested back in order to generate more income.

The figures used -- that is, $165,000 becoming $1 million -- are based on the actual yearly return of 9.5% for the U.S. Stock market way back to the year 1927.

This simply means that on the long-term basis, investors who buy and hold on to securities that track the overall performance of the general stock market can gain a 9.5% yearly return.

But you can even do better than that! You can actually turn that same $165,000 principal investment into $3 million within the same length of time. Yes, 30 years! No, within only 23 years, in fact!

How? There is a way to do it without any additional risk on your part.

Are you really excited now? The third step is the key to gaining greater wealth at a more rapid rate.

STEP 3 — Relative Strength Investing gets you faster to your retirement goals.

The Relative Strength approach basically measures a security’s performance in relation to that of another. Although there are various means of evaluating relative strength, the primary point is that a relative strength measurement can be done on any instrument.

Relative Strength, in short, can determine the parts of the general market which are strongest and those which are weakest.

This will allow us to see what is performing below par and, therefore, guide us to invest in the parts that are performing well, increasing the potential to gain greater returns. This is how we can accelerate even more the rate of compounding.

According to a research done by Dorsey Wright & Associates, momentum methods such as Relative Strength investing have overtaken the Total Market return by 4.6%, as determined by an extensive track-record analysis.

Hence, from way back in 1929, instead of accumulating only a 9.5% annual return, focusing your investment wholly on the best-performing portions of the market would have produced a 14.1% return. Moreover, within that long period, the difference in yearly return — while appearing minimal — resulted in increased worth of a portfolio of over 66 times.

As you can see, combining the power of compounding and the advantages of Relative Strength investing can help you earn that million-dollar retirement fund!


Arisa Horikawa

Author:Arisa Horikawa
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