Retiring a millionaire is a great dream: A seven-figure nest egg will mean you probably can enjoy your later years without major financial worries. Unfortunately, figuring out how to become a millionaire retiree could seem like it takes a lot of effort -- and a lot of time that you might not have as you manage your job, kids, and everyday life.
The good news: It really doesn't require a ton of work to retire a millionaire, even though that seems hard to believe. If you want to effortlessly achieve this lofty goal, here are four simple steps to take.
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1. Start saving ASAP
One of the hardest things about building a millionaire retirement fund is finding enough money to invest. But the sooner you start saving, the less of a burden this becomes.
If you have 30 years to retirement and earn 10% average returns, for example, you would need to invest about $507 per month. But if you have five years until retirement and earn the same 10% returns, you'd need to put away $13,649.77 a month.
If you want to become a millionaire retiree without lifting a finger, you likely aren't interested in trying to come up with over $13,000 in spare cash each month for your 401(k). So to make hitting your savings targets more effortless, begin the process of investing at least some money right now. It'll make your life a lot simpler later.
2. Take advantage of free money for retirement savings
Since finding the cash to invest is one of the toughest parts of amassing a seven-figure nest egg, it makes sense to get help with this step of the process whenever possible.
This means you should take advantage of all potential sources of free funds you can get your hands on. For most people, this starts with a 401(k). If your employer offers a workplace plan with matching funds, be sure you learn the rules and contribute enough to earn the full match. Otherwise, you are leaving money unclaimed that should be yours.
You'll also want to claim any tax breaks you're eligible for, like the Saver's Credit if you are a middle- or lower-income worker saving for retirement. The more free money you get, the more effortless the process of becoming a millionaire.
3. Automate the process
When you start saving, you can use the calculators at Investor.gov to help you understand how much money you'll end up with at your current savings rate or how much you will fall short by. The calculators can also tell you the amount you need to put into a 401(k), IRA, or other brokerage account to hit millionaire status by your target retirement date.
After figuring out exactly how much money to devote each month to your goal of becoming a millionaire (it takes about 30 seconds using these calculators), set up automatic contributions of that amount into your 401(k), IRA, or other tax-advantaged account.
If you set up automatic transfers, you won't have to think about retirement savings again other than to occasionally change your contribution amount if needed. The money you need to reach your goals will effortlessly go where you need it to.
4. Opt for simple investments
One of the most effortless ways to become a millionaire retiree is to find some basic investments that you can easily manage.
Some people opt for target date funds, which divide invested money into a mix of different assets appropriate for your investing timeline. These funds change your asset allocation as needed as you get closer to retirement, so you really don't have to do anything. But they often come with higher fees.
You can also invest in exchange-traded funds (ETFs) with very minimal effort. You'll want to find one that tracks the market as a whole, such as an S&P 500 index fund. Subtract your age from 110 to decide what percentage of your funds should be exposed to equities in this type of fund and adjust the amount as you move closer to retirement. Then invest the rest in a bond fund. This requires a little more effort than target date funds, but not much -- and it's usually less expensive.
What you likely don't want to do is to pore through investment briefs to find a company you believe in and want to buy individual shares of. While this approach can sometimes help you earn a higher return on investment than with an ETF or target date fund, it also carries more risk and requires more time and effort.
If you are looking for a truly hands-off approach, a target date fund or an age-appropriate mix of ETFs that you can change as needed is a good way to go. If you start saving ASAP, automate your investments so the right amount of money is going into your account, and keep your investments simple, you won't have to spend more than a few minutes each year working toward your goal of becoming a millionaire retiree.
