Amassing $1 million for retirement might seem unrealistic, especially when the median retirement savings for American households is only $87,000. And if you're over 50, achieving that goal can seem impossible without winning the lottery or receiving an inheritance.
However, retiring a millionaire is still possible, even if you are already in your 50s. While you may not have as much time as someone in their 20s, you do have other advantages that can help you reach your goal. Below, we've jotted down a few millionaire moves you can make this year to get you going in the right direction.
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1. Maximize your workplace benefits
If you have a job, your employer may offer a workplace retirement plan such as a 401(k). For 2024, you can stash away up to $23,000 in a 401(k) if you are 49 and under. After you hit 50, you can enjoy a catch-up contribution of $7,500, bringing your contribution cap to $30,500. It's important to review your plan's fees and investment options to determine if it makes sense for you to max out your 401(k).
If you have a good 401(k) plan at work and decide to contribute $30,500 annually, you could potentially reach millionaire status in about 15 years if you earn a 10% average return. Even if you don't plan to be at your job that long, you could still get halfway to your goal in about 10 years. You can also add other tax-advantaged accounts to your retirement portfolio to help you reach the million-dollar mark.
Also, check with your employer to see if it offers a 401(k) match. In a nutshell, a 401(k) match is when your employer contributes additional money to your retirement savings based on the amount you contribute. These extra dollars from your employer can help you reach your retirement goals faster.
2. Open an individual retirement account
Contributing to your company's retirement plan is a great way to beef up your retirement savings, but you shouldn't stop there. If you're earning money, you can also contribute to a traditional or Roth IRA (individual retirement account). These accounts are separate from your employer-sponsored retirement plans and offer the freedom to choose from a wider range of investment options, such as:
For 2024, you can contribute up to $8,000 to an IRA if you are 50 or older, thanks to the $1,000 catch-up contribution. Although the contribution limits are lower than those for a 401(k), your contributions can still add up significantly over time. If you commit to consistently contributing the maximum amount to your IRA as contribution limits rise, you could potentially amass a quarter-million-dollar IRA in less than 15 years.
3. Create multiple streams of income
If you want to position yourself to max out your retirement accounts and you can't cut any more expenses, consider revving up your income. If you've had more than 25 years in the workplace, you've probably picked up skills that you can train others on or provide expertise as a consultant. Find out if your skills are in demand and how you can monetize them. The best part is that one skill can pay you in multiple ways. For example, you could become a speaker, writer, author, consultant, and trainer by leveraging a single skill.
One benefit that you can unlock as a self-employed individual is the ability to contribute to a SEP IRA, which stands for simplified employee pension IRA. As long as you meet the eligibility requirements, you can set aside the lesser of 25% of your compensation or $69,000 in 2024 in the account.
It's important to note that you don't have to take on multiple jobs to increase your income. The money you earn from one job can be turned into extra streams of income by doing the following:
- Investing in stocks to earn dividends
- Opening a high-yield savings account to earn interest
- Renting out space to get rental income
- Writing a book to earn royalties
Get closer to your retirement goals
Achieving your retirement goals comes down to the moves you make right now to set yourself up for a comfortable future. Stashing away money in retirement accounts, taking advantage of catch-up contributions, and leveraging your skills in the marketplace can help you beef up your savings. Even if you don't hit your million-dollar target, these strategies will still significantly enhance your financial security in retirement.
