Phil's
Personal Finance Tip of the Day:
Save Your Way to $1 Million
By Donna Rosato | Money – Mon, Jul 23, 2012 11:45 AM EDT
Research shows that people who practice so-called burst saving are far more likely to sock away enough money for a comfortable retirement than those who don't.
According to a study by the research firm Hearts & Wallets, 64% of burst savers were able to build a nest egg equal to at least 10 times their annual pay, a common benchmark for a financially secure retirement.
They were also likelier than non-power savers to hit that goal no matter what age they started their savings regimen.
Says Laura Varas, a principal at Hearts & Wallets: "Once you've got a base of assets that really matters, it puts a tail wind at your back."
Part of a special report on How to reach $1 million, this story explains how saving aggressively for a decade can help you reach millionaire status by the time you retire.
KEY MOVE: Aim to save at least 15% of your income for a period of ten years or more.
HOW TO GET THERE
Get the timing right. Burst savers most commonly funded a ramp-up in their savings rate with money they received from pay hikes and bonuses, according to the Hearts & Wallets study. That way you don't feel the pain of living on less; you still take home more money, just not quite as much.
Power savers also often timed bursts to periods when their expenses fell or their income spiked. For example, many substantially increased contributions to their 401(k) or other retirement accounts after their children left home or during periods when both spouses were working.
To read the entire article from Money:
http://finance.yahoo.com/news/save-way-1-million-124900798.html
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