When it comes to solid financial planning, the truth remains that you'll reap huge benefits by doing a few key things correctly. You don't need to be a perfectionist or a fortune teller, but you do need to take some basic actions as soon as possible to put yourself on the right long-term track.
Here we'll explore some of these actions that anyone can do -- or at least begin to do -- today.
1. Become tax aware
Nobody is asking you to sit down with the latest unedited version of tax regulations, but you should know a few foundational tax concepts that will make your investing life a lot easier.
First, be aware that short-term trading (defined as entering and exiting positions within the span of a year) will cause any gains to be taxed at your ordinary income rate, which is typically your highest rate. Stocks and other securities held for longer than a year are eligible for long-term capital gains treatment, which implies that any gains will be taxed at a preferred rate. It's in your interest to hold for the long term, at least from a tax perspective.
Next, think about the location of your investments (or the specific account type that houses each position you hold). Stocks and other long-term holds are best held in taxable accounts, while securities that generate most of their return from income (like bonds and REITs) are best held in tax-deferred accounts, like 401(k)s and Traditional IRAs.
These small optimizations will likely end up making a very substantial difference in your ability to become a retirement multimillionaire.
2. Open a Roth IRA
One of the easiest things you can do today to improve your chances of retiring with millions of dollars is to open a Roth IRA. This is true for two reasons.
First, a Roth IRA is meant to hold after-tax money -- in other words, money that's already been taxed. Any amount contributed to a Roth IRA won't be taxed as it grows or when it's withdrawn in retirement, which makes the account a valuable shield against any future tax.
Second, there's a reasonable probability that taxes are "on sale" right now. Taxes are already slated to increase in 2026 as per the 2017 Tax Cuts and Jobs Act, so to the extent you're able to divert money to post-tax accounts like the Roth, it's certainly not a bad idea. In the worst-case scenario -- if taxes were actually to decrease in the future -- you'd still be left with a tax liability of zero when it comes to Roth assets.
3. Be consistent
When it comes to contributing to your employer's retirement plan -- and this is especially true if they offer an employer match -- be consistent. This means that consistent contributions to your 401(k) or 403(b), regardless of where the market happens to be trading at the time, will be a vital piece of your asset base as you grow closer to retirement.
The beauty of scheduled and recurring investments is that emotion is removed from the decision -- in fact, there's no emotion at all. If all you do is set your retirement plan contributions to 10% and do literally nothing else, you're pulling a very important lever that will have positive consequences in future years. In short, be sure to contribute to your employer's plan early and on a fixed schedule.
4. Diversify broadly
Because none of us can predict the future, it's in your best interest to develop a robust asset allocation that can handle all different types of market environments. To be clear, asset allocation is another way of saying "how your investments are divided."
You'd be well advised to invest in both domestic and international stock and bond markets. If one market segment is doing poorly at any given point in time, you have other pieces of your asset allocation that can potentially pick up the slack. Diversification in this way can help protect the long-term growth of your portfolio and simultaneously give you peace of mind.
Do a few things right
Good financial planning involves a series of deliberate, small decisions that ultimately have outsized impacts in the long run. By simply becoming a little more tax aware, opening a Roth IRA, consistently contributing to your employer plan, and diversifying broadly, you're giving yourself the best chance possible to retire with a seven-figure portfolio. Take the time to learn and implement these key ideas and let the results speak for themselves.