A recent Northwestern Mutual survey shows that Americans believe they need $1.46 million to retire comfortably. Unfortunately, you won't have a shot at achieving those goals if you just stick to contributing to retirement accounts and do nothing else. But there's one move that can supercharge your savings and give you a better chance of becoming a millionaire retiree.
Image source: Getty Images.
Make your money work for you
Let's say you meet the income requirements and can set aside $7,000 in your Roth IRA every year for 40 years. That's $280,000 in contributions saved. Contributing money to a retirement account is a great start to boosting your retirement savings, but it's not enough. If you contributed $7,000 annually and let the money sit in your account, it would take you more than 142 years to reach $1 million.
To build your retirement savings in a reasonable amount of time, you'll want to invest the money that you contribute to your retirement accounts. The table below shows the power of compounding and how investing can significantly boost your retirement savings. Take a look at how much you can earn over time if you invest $7,000 annually and average an 8% investment return each year.
|
GROWING AT 8% FOR |
$7,000 INVESTED ANNUALLY |
|---|---|
|
10 years |
$109,518 |
|
20 years |
$345,960 |
|
30 years |
$856,421 |
|
40 years |
$1,958,467 |
Investing your money can significantly shorten the time it takes to reach your retirement goals. However, remember that investment returns aren't guaranteed. Past performance also isn't indicative of future returns. But it's wise to look at trends to help you narrow down the list of stocks or other assets you want to research and better understand the risks you're taking on.
Still, the biggest risk you can take is letting your money sit idle and not investing at all. Aim to save and invest as much as you can if you want a shot at joining the millionaire retirement club.
