9 Investing Tips to Make You a Retired Millionaire

9 Investing Tips to Make You a Retired Millionaire

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A lot of people assume retirement is a reward for a long career and lots of hard work. However, the ability to retire comfortably is not a given. It’s earned by those who prepare well.

With increasing life expectancy across the globe and social security facing funding challenges, it’s more important than ever that you take your financial future into your own hands. Especially if you want to retire without financial stress.

In this post, we’re going to share 9 investing tips to make you a retired millionaire. Remember, how much you actually need in retirement will depend on your living expenses, how long you live, and how you plan to spend your time (some hobbies ain’t cheap, y’all).

Let’s jump in.

TABLE OF CONTENTS

1. Invest for the long haul
2. Pick the right investments
3. Contribute consistently
4. Start today
5. Don’t steal from future you
6. Pay attention to fees
7. Diversify
8. Automate
9. Use tax-advantaged accounts
Conclusion

How to Become a Retired Millionaire

1. Invest for the long haul

Investing tip number one: if you want to become a retired millionaire, you have to have the right state of mind.

Having a long-haul-investor mindset is key, or else you’ll find yourself tweaking your investments with every rise and fall of the market. This inevitably leads us to buy high and sell low, no matter how hard you fight it.

Chances are, if you’ve picked good investments and you’re willing to stick with them for the long haul, you will perform in-line with the market (which is great!)

Another reason to have a long-haul mindset when it comes to investing? It allows you to stop worrying about your financial future and focus on more pressing things like getting promotions, spending time with family, and enjoying life! It’s a win, win, win.

2. Pick the right investments

We like low cost, market-mirroring index funds or ETFs and hang on to them. If you choose this type of fund, chances are high that you’ll outperform expensive, actively managed funds in the years to come, so why let someone else charge you an arm and a leg to manage your investments for you?

A few funds to begin your research:

  • Vanguard Total Stock Market ETF (VTI)
  • Vanguard Total Stock Market (VTSMX)
  • Vanguard Small-Cap Index Fund (VSMAX)
  • Vanguard Mid-Cap Index Fund (VIMAX)
  • Vanguard Total Bond Market Index (VBMFX)

A Betterment or a Vanguard account is all you need to get started. (Disclaimer: you’ll want to do your research before sticking your money somewhere. Investing isn’t rocket science, but you should know what you’re invested in and why.)

3. Contribute consistently

Dollar-cost averaging happens when we contribute the same amount to our investment account month after month. This essentially means you will buy high, you will buy low, and it all averages out to mirror the market.

The key here: you have to be consistent. We get it, some years you can contribute more than others. But you should try to automate these contributions to be the same amount month after month if possible.

4. Start today

Time is your best friend. Especially if you’re young. Compound interest needs time to do its thing, so start today. Future you will thank you. What if you’re not young? Still start today. You can’t go back in time, and if you want to retire comfortably, you might have some ground to make up.

5. Don’t steal from future you

Please, please, please don’t take money from your retirement accounts early. Even for emergencies. That’s what money market savings accounts are for. Open one today and be prepared for your next emergency so that your retirement account can serve its intended purpose: making you a millionaire by the time you retire.

6. Pay attention to fees

Even 1% in fees will take a huge chunk out of your total nest egg by the time you retire. That’s why it’s so important you dive deep into your retirement accounts to ensure that management fees (if you have them) and expense ratios are low (preferably under 1%).

Betterment is known for having low fees, and Vanguard has a lot of incredibly low-fee index funds from which you can choose. The only exception to this rule is if your employer offers a 401(k) match and your investment options are limited.

Don’t miss out on the match. Take advantage of it.

Still, research your fund options within your 401(k), but always invest there first. The match from your employer is free money.

7. Diversify

Personal Capital will help ensure you maintain a diverse portfolio. You can even tell them your retirement goal and your app will tell you if you’re on track, if you need to invest more, or if you need a more aggressive investment strategy. When US stocks are down, you’ll be happy you hold a diverse mixture of stocks, bonds, international stocks, and REITs (or some other combination of investments).

8. Automate

Automation is absolutely necessary if you want to become a retired millionaire one day. Don’t force yourself to make the right decision every month. Set up recurring contributions so that each month your bank automatically transfers money into your investment account. This also allows dollar-cost averaging to do its thing.

9. Use tax-advantaged accounts

It’s hard transferring a percentage of your income to an account that you can’t touch until you turn 59 years old, such an IRA. Nevertheless, with a Roth IRA, your money grows tax-free. So when you turn 59, that money is 100% yours.

Traditional IRAs allow you to reduce your realized income today, so at the end of the year you’ll pay less in taxes (but you will eventually be taxed upon withdrawal). Both have their advantages. It’s up to you to use them!

Conclusion

Retirement is not earned by hard work or how successful you are in your career. It’s the result of making smart spending decisions, putting your money in the right places, and having the willpower to leave it alone for a really long time. If you can manage to consistently do the 9 things on this list, becoming a retired millionaire will practically be inevitable.

However, if you really want to retire comfortably, your first step is to calculate how much you will actually need in retirement. Because, while the title millionaire sounds fancy and fun, it’s more than some of us need to retire, and for others it won’t be enough.

Check out this great retirement calculator by NerdWallet. It will give you a clear picture of your target and tell you how much you should be saving each month in order to reach your goal of retiring comfortably. Best of luck!

Thinking you might need to cut back on your spending in order to save more? Getting serious about saving may seem daunting, but it doesn’t have to be. Just like any worthwhile endeavor, starting small is key.

Establishing new budgeting practices can take as little as five minutes. Use these five frugal living tips to whip your budget into shape and start saving today.

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