9 Simple Tips for Retiring Rich

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Retiring rich requires a series of choices; they are often difficult. A comfortable retirement is not a foregone conclusion, even if you lived comfortably in your working years.

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Since WWII, we have enjoyed one of the most productive economies the world has ever seen, yet many seniors are broke. When you reach retirement age, you don’t have to be one of them.Whatever your age, fretting about what you didn’t do is futile. Start making the needed changes today.

The best place to begin is to define “rich.” For our team, rich means having enough money to choose whether or not to work and enough money that you control your time. Rich means you live comfortably according to your personal standards. If you’ve lived a middle-class lifestyle, a rich retirement means you can maintain that same lifestyle without worry.

The 9-Step Program

#1—Saving money is tough! Pension plans are no longer the norm. Some companies filed for bankruptcy and broke their promises. Either way, in the private sector, 401(k) accounts are the new norm. However, they’re optional — no one makes you contribute.

So, no matter whom you work for — a big or small corporation, a government agency, or yourself — if you want to retire, be damn sure you’re saving…no matter what you’ve been promised.

#2—Plan to work your tail off. If you want to pay for 60-plus years of life, chances are you’ll have to do more than 40 hours a week.

In theory, you can work 60 hours a week, live off two-thirds of your income (40 hours’ worth), and invest the remaining one-third (20 hours’ worth). However, if you start saving early, perhaps saving income equal to 10 hours of work will be enough. Your savings will have more time to accumulate and compound, and you’ve bought yourself extra leisure time along the way.

If both spouses are working hard outside the home, which is the norm today, work toward living off of one paycheck and investing the other (or using it to pay off debts and then start investing).

#3—Don’t complain when others retire with more. Someone always will.

This note saddens me. Some people chose to work 40 hours a week for most of their working lives. They felt it was important to spend more time at home with their families, and there’s nothing wrong with that choice. Still, it’s a trade-off.

I look at it as though they enjoyed mini slices of retirement time when they were young. If that’s your choice, don’t begrudge others who chose a different path and worked and/or saved more. They don’t owe you anything.

#4—Get out of debt and stay that way. Virtually every wealthy friend I have only started to build wealth after eliminating debt, including home mortgages. Some theory-loving pundits suggest taking out a low-interest mortgage and investing the money with the hope of earning more than the mortgage interest. Oh really? Most people’s investments don’t perform that well.

The chart below highlights how poorly the average investor stacks up:

Sure, some beat the odds, but even professional fund managers struggle to do so. As of mid-2013, 59.58% of large-cap funds, 68.88% of mid-cap funds and 64.27% of small-cap funds underperformed their respective benchmark indices, according to Aye M. Soe, McGraw Hill (MHFI) financial director.

If the big boys have a hard time and the average investor earns just 2.1%, one better secure a darn low mortgage rate before borrowing to invest.

One of the top ways to blow your nest egg is to stop working while you still have a mortgage. Downsize if you have to. Your personal home is not an investment; it’s part of the cost of living.

#5—Get smart while you get out of debt. Commit some of your time to financial education long before you plan to retire. Part of the reason the average investor earns just 2.1% is that many retirees, if not most, haven’t taken the time to learn. If you want to out-earn the average investor, start by investing in education.

Understanding the markets is an ongoing process. The investment world is constantly changing, and if your interests lie elsewhere, it can be a challenge to keep up. A little commonsense scheduling goes a long way, though. Record your favorite programs and watch or listen at night when you’re tired. Then find an hour a day when you are fresh and devote it to more focused study. An hour-long television show has 15-20 minutes of commercials. You can bank that much study time by hitting fast forward.

#6—Set realistic objectives. Get some professional help and thorough financial checkups so you can set attainable targets. With those in place, you can build a realistic plan. The sooner you go through this exercise, the less painful it will be to make any necessary lifestyle adjustments.

#7—Get a grip on your expenses. Investments appreciate (at least that’s the plan). Cars, televisions, and most other stuff depreciate.

Some years ago I read that around 90% of top-of-the-line Lexuses and Mercedes were financed. I live in a community where most of the homes have three-car garages. I shake my head as I drive down the street in my Toyota and see three luxury cars in a garage. I wonder how many of them are financed. It’s easy to have well over $150,000 invested in rapidly depreciating automobiles. With so many long-term auto loans available today, it’s also easy to owe more than the car is worth fairly quickly. Once you get on that treadmill, it’s hard to get off.

#8—Put yourself first. Another common way to blow your nest egg is to spend too much money on others. Your family should not expect you to support them in adulthood, pay for your grandchildren’s college education, or help with major purchases. Take care of yourself and your spouse before anyone else. In time, your family will come to appreciate your self-sufficiency. If not, too bad.

#9—Take advantage of free money. I cannot fathom why such a large percentage of workers with 401(k) accounts do not maximize their contributions. In addition to the tax benefits, many employers match a percentage of those contributions; it’s free money.

If your employer doesn’t offer a 401(k), maximize your IRA contributions. If you’re over age 50, don’t forget the catch-up provisions that allow you to save even more. Free money is low-hanging fruit, so run and grab as much of it as you can.

Start mapping your own path to a rich retirement by reading Miller’s Money Weekly, our free weekly e-letter where my team and I cover pressing money matters and share unique investment insights for seniors, savers and other income investors—all in plain English. Click here to receive your complimentary copy every Thursday. Follow us on Twitter @millersmoney.


Article printed from InvestorPlace Media, https://investorplace.com/2014/10/9-tips-retiring-rich-retirement/.

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