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How to retire a billionaire

By
Mary Kate Miller
January 8, 2018

You read that right, billionaire -- with a B.

We know. Retirement savings doesn’t always feel like the most exciting topic. If you’re younger, it feels far away; if you’re older, it feels too urgent to consider nuances. The truth is that most Americans aren’t saving enough for retirement. We’re not here to judge. We’re just here to give you the tools you need to knock it out of the park when it comes to retirement savings so that one day you can retire like a millionaire or maybe even a billionaire

Who says that you have to change your life and your spending habits once you reach retirement? If you save enough — and save smart— then you can be living the high life in retirement. You might even find that if you follow these tips, retirement may come sooner than you expected.

Take the free money from your employer

It’s the advice you’ll hear over and over again, but if your employer has a matching program for their 401(k), take advantage of it. Full stop: Get that free money. If your employer matches what you contribute to your 401(k) dollar for dollar, then you’ve immediately doubled your contributions and growth. You won’t find any other type of investment that immediately doubles. Even if your employer only matches $.25-.50 on the dollar, that’s still free money. Take advantage of that.

Have an individual retirement account

In addition to your 401(k), Individual Retirement Accounts (IRAs) are key towards saving and building wealth for retirement. There are a few different types of IRAs. A traditional IRA allows you to invest money similar to a 401(k) in that you can invest money pre-tax. Unlike a 401(k), you don’t need to be part of an employer-backed program. You can invest on your own— up to $5,500 in 2018.

Roth IRAs are similar in the “go your own way” approach, but they’re different in that the money you contribute is post-tax. That means you pay tax when the contributions are made, rather than when they are withdrawn. This makes Roth IRAs an invaluable financial asset for those at the beginning of their career, when you will ostensibly be in a lower tax bracket.

All retirement accounts come with limitations alongside their perks. There may be penalties for withdrawing money too early (for example, with IRAs, you may be penalized for withdrawing before age 59 1/2). For IRAs, there are also income caps. In 2018, you have to make less than $133,000 for single filers and $199,000 for couples filing jointly.

Let your money work for you

There is a common adage that no one has ever gotten rich off their nine-to-five. When you invest the money that you’ve earned, you give yourself the chance to enjoy a higher rate of return on your investment. For most of us, this will be true: We won’t save our way to millions, investment will be key.

Invest in something you care about

Again, we get that saving for retirement can be hard. Investing in something you care about can help. When you care about the companies and the causes you’re supporting, then you feel like your money is out there doing good in the world. That’s why each of our portfolios has been filled with companies working to address a major threat facing the world today. When you put your money into an investment that’s working towards, say, renewable energy, you know that in addition to saving money for retirement, you’re impacting the world for the better.

Automate, automate, automate

Chris Reining set a goal to build a financial portfolio of $1 million and retire by age 35. At age 37, he reached that goal. How did he do it? The IT specialist attributed much of his success to automation. He automated bills, yes. He also automated contributions to all of his investments. This secured his investment portfolio and saved time, which he was able to dedicate to other tasks.

Setting up your investments for automatic contributions can be a key strategy towards stabilizing your retirement. When you have to think about how much money you want to contribute each month, it gets harder to do. You could pretty much always use $50 for something that day or that week. But when you set up your investments for recurring contributions, it happens without you having to think about it— and to be honest, you probably won’t even notice. Out of sight, out of mind, and into a healthy retirement.

Forgive yourself

Time is your best ally when it comes to retirement. The sooner you invest, the more compound interest you’ll accrue. Still, if you’re coming late to the game, don’t beat yourself up. It’s better late than never, and there’s no better day than today to finally open that IRA.

Getting to the billions

So – how much do you have to save and invest to retire with $1 billion? Well...it’s a lot, obviously. Here are the details:

Let’s say that you’re an average American earning a slightly above average salary – $75,000 per year – and you’re all about that debt-free lifestyle. With 45 years to save and a 7.5% return, you’ll only need to save $225 per month. Not too much, right? That’ll get you to $1 million. If you want to be in the 3 Comma Club, you’ll need to sock away and invest $224,000 per month. That’s a bit more than your daily latte, I’m guessing. Keep your goals realistic and attainable – like a cool one million dollar retirement goal.

https://www.marketwatch.com/story/the-amount-of-americans-not-saving-for-retirement-is-even-worse-than-you-thought-2017-02-21

https://www.cnbc.com/2017/09/15/why-you-should-take-full-advantage-of-the-401k-match.html

http://blog.swellinvesting.com/which-ira-is-right-for-you-swell-investing-impact-ira

https://www.rothira.com/roth-ira-rules

https://chrisreining.com/tiny-habit/

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