3 Stories of Saving Big!
Save more than $1 million for retirement? Are you kidding? That goal seems so daunting.
Only 46% of workers have even tried to calculate how much money they will need to retire comfortably, according to the 2013 Employee Benefit Research Institute Retirement Confidence Survey. “Most people aren’t saving, and they aren’t saving enough,” says Ruth Helman, co-author of the EBRI survey.
A strong stock market in the past two years has helped retirement accounts, but most investors have a long way to go to reach the $1 million mark. The average 401(k) account balance is $255,000 for participants age 55 and older who have been with their current employer for 10 years, according to Fidelity Investments, one of the largest retirement plan administrators.
The National Retirement Risk Index finds that 53% of U.S. households are at risk of not having enough savings to maintain their living standards in retirement. “You have to make a choice,” says economist Anthony Webb, “work a lot, lot longer or save a lot, lot more.”
But reaching $1 million is not impossible, even for ordinary investors. LearnVest spoke to three everyday millionaires who grew their nest eggs through thrift and investment savvy. We asked them how they did it and what advice they would give to investors looking to follow in their footsteps.
Laurie Itkin, 44, La Jolla, Calif.
How Much She’s Saved: $1.1 million in a 401(k) plan, traditional and Roth IRAs, and a brokerage account.
How She Did It: I lived below my means; that’s the number-one reason I’ve been successful.
I created a $1 million portfolio by the time I was 40. I started investing in the stock market in 1993 when I was 24 years old, with $1,600 my grandmother left me. You have to learn by doing with investing. I started reading The Wall Street Journal every day, like my grandfather.
I always maxed out my 401(k). I put 60% into emerging markets and 40% into growth stocks, meaning stocks that have more volatility than the S&P 500. It was higher risk but offered potentially more returns. I didn’t spend one penny of my bonus, sending it straight to my retirement accounts.
As my wealth increased I still lived in a modest apartment. In my mid-30s, I lived like a college student and I was proud of it. When I was dating my husband, Dan, he couldn’t believe I had my television on a used table I had bought for $10.
I also made a few decisions contrary to most people. I did not buy real estate when I could afford to, even though I had a $100,000 salary by the time I was 30, working as a telecom lobbyist in Washington, D.C.
The only debt I had was student loan debt that I paid back, and then no debt at all until I bought a house at 35 with my husband.| Print