So one of my fave PF bloggers (J. Money over at Budgets are Sexy) is aiming to have a million in the bank before he retires. With his Millionaire Club, he inspired me to make some goals as well. And seeing as we're still in resolution territory, I thought it would help steer me in the right direction for the new decade and hopefully inspire a few of you out there!
How I'm Going to Retire and Live Like Diddy (or something...)
1) Open a Roth IRA this year and max out on contributions annually (that's 5K a year)
2) Establish an emergency fund (around 12K) and put it in a high-yield savings account or a no-penalty CD - I'm getting there...
3) Remain credit card debt-free
4) Up my 403b contributions to 10% of my take home pay
5) Put any additional income (raises, bonuses, lottery winnings - ha!) into savings/retirement
6) Continue to monitor my spending and my budgets
7) Continue to live within (or below) my means and not spend impulsively
8) Talk with my husband at least once a month about our money so we're both on the same page
9) Start a "vacation fund" so I can have fun and not feel guilty about it - it can't be all work and no play!
I don't know exactly when I'll get to the cool one-mil figure in my account, but I think if I have a plan, I'll get there eventually! Thanks, J. Money!
Anyone else want to make a Millionaire To Do List? I'd love to hear how you are planning on saving money!
I hate to break it to you, but for our generation, if you're not a millionaire, you won't be able to retire. Most people can safely pull 5% of their retirement fund (to pull a higher % requires a much larger fund that can resist market swings). $1m yields $50k (although tax on Roth accounts is prepaid, making them worth 20%-ish more), which is decent but not phenomenal.
ReplyDeleteHowever, that's in nominal dollars, which won't be worth as much in the future due to inflation. By the time you retire in about 35 years, that will be worth only about half what it used to be if inflation is at 2%. It'd be hard to get by on a $25k income. Realistically, you need to get to about $2 million, and should aim for more in case a recession hits right at retirement or inflation is worse than expected.
In my case, I need to max my and my wife's Roth IRAs and give 9%+3% match to my 401k from a good job just to make it. And that doesn't count kids' college, daughters' weddings, possible serious illness, etc... My plan is to choose time-consuming hobbies that are cheap and make my retirement savings fully automatic via paycheck deductions. I also have a deal with my wife where I get to spend 10% of my bonus and the rest goes in savings.
Don't forget that the government owes many trillions of dollars on your behalf and many Americans have way too little savings even for their own retirement, so the prudent few will likely be called on to "share" their wealth or the inflation rate will be very high (think 10% inflation for 15 years...). The US federal debt is about $550,000 per household (about $81,000 of which was added this year).
As usual Dave, brilliant points. A million dollars sounds like a really high number, but due to inflation, perhaps another recession, and other unforseen circumstances, it seems like it may not be enough to retire and live comfortably. Then again, I suppose on what your definition of comfortable is (probably not the same as Diddy's idea of comfortable).
ReplyDeleteI'd love to hear more about your time-consuming hobbies that are cheap! This should be another one of my New Year's resolutions!
And you're saving for just your daughters' weddings? What's up with that? ;)
Cheap hobbies: hiking/camping, beer brewing, board games, weightlifting and fitness. Even if you buy all the gear you can dream of for those, it'll last forever, keep its value, and still be cheaper than going out on the town or racing cars. I recently picked up sailing, though, which is not cheap at all (although thanks to Groupon and Sail Sand Point I sailed for all of August and September for only $50!).
ReplyDeleteOh, and I'm only saving for my daughters' weddings because it's socially required. I'll cheap out on my sons (and my daughters too if they'll let me get away with it).
ReplyDeleteLive without debt, live within your budget and let your passions control your future endeavors. The money will always follow! :-)
ReplyDelete~FrugalGuy
I have always dreamed of getting rich, and today I can shout it out to the world: I am RICH made a lot of money and I haven't been working for about 3 months, thanks to https://bit.ly/39yR3qd
ReplyDelete