One million dollars might not be the magic retirement number anymore, but it's still a significant milestone to strive for. Recent data shows that many people are still far off from this goal, with the median retirement savings hovering at $87,000 for American households.
On the other hand, Fidelity points out that more people are crossing the million-dollar mark, with 391,562 IRA (individual retirement account) and 422,000 401(k) accounts holding $1 million or more. The moves you consistently make will play a major role in determining which side of the fence you'll land on.
If you're looking to join the seven-figure retiree club, we've highlighted a few millionaire traits that stand out.
Image source: Getty Images.
1. They start early and stay consistent
It's tempting to put retirement on the backburner when you are younger. However, the earlier you start saving for your future, the better your chances of building a seven-figure retirement.
For example, if you invest $500 per month in the stock market and earn a 9% rate of return, it would take 31 years to become a millionaire. But if you delay investing until later in life, say starting at 40 instead of 20, you'd need to contribute significantly more to reach your goal before you retire.
Starting early can take some of the pressure off later. You'll be able to take advantage of time so you can grow your money through the power of compounding. But don't just focus on starting early and leave it at that -- staying consistent is also important if you want to finish strong. Regular contributions to various accounts, such as a Roth IRA or 401(k), can add up significantly over the decades.
2. They maximize workplace benefits
If your employer offers a 401(k) or any other type of employer-sponsored retirement plan you're satisfied with, contribute as much as possible, especially if you're looking to save money on taxes in the current year. For 2024, you can contribute up to $23,000 to a 401(k) if you are 49 and under. The contribution cap rises to $30,500 if you are 50 and older. Also, take full advantage of any 401(k) match offered by your employer. This is essentially free money that can help you beef up your retirement savings.
But don't stop there. Your employer may offer other perks that can help you increase your income or save money, including:
- Employee stock purchase plans
- Restricted stock units
- Stock options
- Professional development opportunities
- Tuition reimbursement
3. They invest beyond the workplace
Building a millionaire retirement at work is possible, but it's not the reality for most people. If you want to increase the odds of reaching your goal, you'll want to also consider investing in IRAs (individual retirement accounts), brokerage accounts, and other vehicles. Roth IRAs offer more investment options and set you up up for tax-free income during retirement. With brokerage accounts, there are no contribution limits, so you can easily boost your savings over time.
Let's say you were planning to save $7,000 in an account every year, which is currently the maximum amount you can contribute to a Roth IRA in 2024 if you are under 50. The table below shows how much your money can grow over time if you invest that amount consistently and earn a 10% average annual return.
|
Growing at 10% For |
$7,000 Invested Annually |
|---|---|
|
5 years |
$47,009 |
|
10 years |
$122,718 |
|
15 years |
$244,648 |
|
20 years |
$441,017 |
|
25 years |
$757,272 |
|
30 years |
$1,266,604 |
Data source: Author.
4. They track their net worth
Instead of solely focusing on the income that's coming your way, those on the path to building a millionaire retirement also track their net worth. Your net worth is the sum of all your assets minus your liabilities. Checking accounts, money market accounts, certificates of deposit, and retirement accounts are all considered assets. On the flip side, credit card balances and student loans are liabilities. Tracking your net worth will reveal how close you are to becoming a millionaire retiree and help you identify areas for improvement to stay on the right track.
If you're looking to improve your net worth, here are a few moves you can make:
- Pay down debt
- Live below your means
- Invest in assets
- Check out high yield savings accounts
- Increase your income
Becoming a retirement millionaire is within reach if you have a solid plan and a long-term outlook. Data from Fidelity shows that more people are joining the ranks, so you can be next in line if you tap into proven strategies that have worked time and time again.
