Personal Finance News Monday 5/20

Phil's Personal Finance Tip of the Day:
How to Retire With $1 Million

By Emily Brandon | U.S.News & World Report LP 

Saving $1 million for retirement is a realistic goal for most workers, but it will take a considerable amount of effort to get there. And there are plenty of fees, taxes and penalties that could make it even more difficult to hit this worthy savings target. These strategies will help you to save $1 million over the course of your career:

 

[Read: 7 Obstacles to Saving for Retirement.]

 

Start young. The easiest way to save $1 million is to begin saving at your first job. If you start saving at age 25, you could save just $4,682 per year and reach $1 million by age 65, assuming 7 percent annual returns, according to calculations by David Fernandez, a certified financial planner for Wealth Engineering in Scottsdale, Ariz. "You could do that by maxing out a Roth IRA or saving in a 401(k)," Fernandez says. "If you wait until 35, the amount you need to save more than doubles." Beginning at age 35, you will need to save $9,894 each year to accumulate $1 million at age 65. If you further delay saving, you'll need to tuck away $22,798 annually beginning at 45 or $67,643 at 55 if you hope to be a millionaire upon retirement at 65.

Set intermediate goals. While saving $1 million might be your ultimate retirement goal, it helps if you set some intermediate goals along the way. "If you've gotten to save $50,000 or $100,000, then you can do something significant that is important to you to celebrate," says Mary Brooks, a certified financial planner for Brooks Financial Planning in Colorado Springs, Colo. "Your enthusiasm is renewed because you really feel like you have gotten someplace."

 

Keep expenses low. Pay attention to the expense ratio of each investment you choose, and try to select those with low fees and expenses. "Always go for low-cost investments. The only thing you can control is what you pay for stuff," says Walter Romatowski, a certified financial planner for Castellan Financial Advisors in Palo Alto, Calif. "For most people, it probably makes sense to invest in index funds because they typically have lower expenses as compared to actively managed funds. You can pay 0.1 percent or 1 percent, and that makes a huge difference over your lifetime."

To read the entire article by Emily Brandon | U.S.News & World Report LP:
http://news.yahoo.com/retire-1-million-131007033.html


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Hi my name is Philip J. Miano and I am the founder of PJM Personal Finance and Productivity Coaching specializing in Budgeting, Debt Reduction, Bank Reconciliations, Goal Setting, Time Management, and Organizational skills. Please visit my website: http://pjmcoaching.com.