Avoid the noise and plan for your retirement with a very simple strategy almost anyone can partake in.
There are so many ways to build wealth. Unfortunately, most avenues are complicated for the laymen to understand. It is safe to say it usually takes the average person until about age 30 to get their life and career under control. That is around the time we settle down and start a family and begin to protect the future of our family legacy. With some simple steps we cover, you can visualize how it is possible to retire in thirty years with 1.7 million dollars and that is not even the good news!
Ok now that we caught your attention with the astonishing number of 1.7 million dollars. Did you know that would only allow you to live with $50,000 for approximately 30 years after you saved it with this simple investing strategy? The good news starts to unravel if we do not touch the accumulated 1.7 million dollars ever and keep a permanent plan in place. We can then go on to make a 10% income that can be taken out annually equaling $170,000 from the 1.7 million for as long as we live. We can then leave that 1.7 million for our kids to enjoy after we depart.
Here Are Ten Simple Steps, You Should Take To Prepare For This Reality.
- Start your life off as early as possible debt free and stay debt free forever.
- Live on less than you bring in annually.
- Make a monthly budget and always stick to it. Be realistic and religious about your budget.
- Get on the same page with your spouse and immediate family members about this new lifestyle plan.
- Shop for deals doesn’t waste money and forget about keeping up the with Joneses.
- Always educate yourself and your family members on the topic of money and personal development.
- Write down your goals and stick to your plan. Update your plan often.
- Don’t seek advice from friends or family members, get advice from people who are successful and experienced on this topic and have the patience to teach you over the long haul. A great place to start is financial guru Dave Ramsey and his excellent team.
- Pay off your house as fast as you can, and don’t take on any new debt including cars. Build up an emergency fund for those unexpected needs.
- Make sure you have term life insurance policies in place for all family members until your kids move out, the house is paid off and until your age sixty-five whichever is best for your life and needs. After these milestones, you can still hold a policy, but you probably won’t need it because you will have wealth built and a safety net. Again every situation is different so use your best judgment.
Next you can start to think about your retirement future and have the means to put a robust plan into effect. The best thing about this is you can look at this like a self-directed insurance policy on top of other mechanisms you already have intact. You may also have other investments, pension, 401k, accumulated assets like art, jewelry, antiques, real estate holdings, business operations, royalties, etc. from endeavors throughout your life span. So this is just a simplified approach to saving on top of all of those other instruments you have in place. The more ways you have to prepare for retirement and build wealth the better.
The Million Dollar Plan
- Max out your US Roth IRA or Canadian TFSA. Depending on when you read this we will use the example of $50,000 for the math.
- Buy a set of diversified growth mutual funds that have a long track record that can potentially yield you a 10% return each year.
- Add and max out your annual contribution room each year going forward. So let’s just use the number $5,000 for this example.
If you take the example lump sum number of $50,000 to start, and add $5,000 to that each year and plug this into a compound interest calculator at the annual growth rate of 10% you will quickly see after thirty years time; this number can equal over 1.7 million dollars. You can now draw out this accumulation of tax-free cash and live on $50,000 annually until your 100 years old, or you can leave the 1.7 million in this investment vehicle and draw out the annual interest of 10% each year for the rest of your life. That would equal approximately $170,000 each year to live on tax-free, and the 1.7 million principal will always stay in there for the rest of your life and can be passed on to a beneficiary when you depart.
You may be asking yourself how can I get my hands on $50,000 right now? There is another way to approach this strategy; you can start off by maxing out your contribution space each year ($5,000) and not commit any lump sum to start and still end up with just under 1 million dollars in 30 years. Same principal will apply after the 30 years you can begin to draw out 10% each year to live on which would be just under $100,000 which is a nice amount for only saving $5000 per year for 30 years and earning 10% on that each year.
As you can quickly start to see this plan is simple and not far fetched. The only responsibility you will have is to research the right mutual funds you should invest in to yield a 10% return on your money each year. You should find funds with a long track record and mature history. Mutual funds are best when they sit for many subsequent years and not cash out when the markets are bumpy. Some years will be booming, some may be flat and others will be down, that is why it is important to leave in there for the long haul and commit. It is always wise to have another backup plan as well just in case because nothing is 100% certain. The takeaway is money does grow on trees if you plant the seeds early in life!
In all cases its best to discuss with a professional, Dave Ramsey makes this step easy and provides links on his site for providers he recommends/endorses in your area. Have fun with this journey, everyone is different so do your homework and figure out what is right for your life. Now you, at least, have some basic incite to work with to help you visualize the potential. Good luck!