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Make a million bucks

By Barbara Whelehan · Bankrate.com
Saturday, February 16, 2013
Posted: 6 am ET

The other day, one of my 40-something colleagues asked me what he can do to better prepare for retirement. He said he contributes 5 percent of his pay to his 401(k). "Contribute 10 percent," I suggested. He replied that his budget is tight, and pointed out that with the company match, he's really investing 8 percent of his pay. "Contribute at least 2 percent more," I recommended.

Plenty of Americans in all age groups are in the same retirement planning predicament. They're not sure how to adequately prepare. All they know is that they need to save a truckload of money to get them through 20- or 30-plus years of retirement. A million bucks seems like a worthy goal.

There's hope for everyone who sets this intention, regardless of how old they are. In fact, the late Bill Fisher didn't seriously start amassing wealth until he was 72, as revealed in the self-published book, "The Boomer's Guide to Recovering Your Lost Retirement: The Bill Fisher Story," by Michael R. Burns. Burns wrote about his father-in-law's methods of accumulating wealth.  

Long story short, at 72 Fisher invested $50,000 in life insurance proceeds, as well as his pension and Social Security checks, and continued to work until age 84, when he finally retired. As an octogenarian, he was worth a million dollars.

5 steps to success

I asked Burns for the best advice to boomers who may have lost money in the recent financial crisis. In his words:

  • First, they have to balance their budget. They have to get more income coming in than they are spending each month.
  • Second, they must continue to work. We are all living longer. … If you are healthy, you should be able to work at least until 70. You can work from your home being a rep for a company or sell stuff on EBay.
  • You should wait to take out your Social Security until 70. In most cases, you can double your money.
  • You should contribute to an IRA and 401(k). In these tax-deferred retirement accounts, you can build wealth quickly.
  • With your leftover money, you should invest in high-dividend stocks, dividend reinvestment programs, or DRIPs, municipal bonds and residential real estate.

"Baby boomers should create multiple sources of income," Burns says.  "They can live off their salary and invest everything else. Bill Fisher did this and he lived a very active life, traveling overseas, going to the country club and still built a net worth of $1 million when he was in his 80s."

Get a head start

While Fisher's accomplishments are inspiring, it's better to start saving at a younger age and make it a goal to amass a million bucks or more long before you turn 70.

Of course, unlike Fisher, whose house was paid off and whose children no longer depended on him, younger folks face more financial obstacles. They need to negotiate the purchase of a home and car, pay off student loan debt, save for their own children's college education, put money in an emergency fund and invest for retirement -- all while juggling monthly bills for current living expenses.

But the younger you are when you start saving for retirement, the better your chances of amassing a million bucks or more because of the power of compounding. Start by deferring 10 percent of your pay to your company retirement plan. You won't miss it if it goes directly into investments instead of your checking account.

And if your company doesn't offer a retirement plan, open an individual retirement account and set up automatic transfers from your savings or checking account. That's the easiest way to accumulate wealth -- maybe a million bucks or more.

The bottom line: While it's never too late to start saving for retirement, it's always better to start early.

***

Follow me on Twitter: BWhelehan.

Barbara Whelehan is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It is available at Amazon, Barnes & Noble, iBookstore and other e-book retailers.

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68 Comments
Tazz
February 19, 2013 at 5:05 pm

I retired from FOMOCO 12 years ago I started at age 19 put 5% in retirement 10% IN 401 10% savings from the start.If you start saving from the start you wont mis the money cause you never had it in the first place after 30 years and only 49 years old I retired.life is to short enjoy it. That Company will be fine with out you all though FOMOCO did go in tank when all use baby boomers left cause we cared about what did and took pride in our work. They they have turn things around with pride again GO FOMOCO.SS I hope is still in buisness when Im 70 HA

Mary Davin
February 19, 2013 at 4:46 pm

Agree with posted comments - the experts are not realistic with their advice - we can't save if we have debts to pay first because cost of living is so high and wages low, if you can even get meager wages after losing jobs due to greedy and discriminating employers and their bottom $$$ lines. My bottom line does not have any excess for savings after paying debts on and on. Discrimination, job losses has to stop, wages need to increase and even then we may only have a buck or two at the end of the month to save! Let's get real!

reality check
February 19, 2013 at 4:30 pm

I would like to work, but my company fired me when I turned 64. The way they told me was "this isn't working anymore and we are pulling the plug". I got a receipt for my company blackberry, laptop and name tag and I was gone. Age discrimination suits are usually a waste of time according to attorneys.

In order to make my budget work I have to take social security now. Fortunately I have closer to 2 million saved so if I can make 8% average (reasonable over time) and live on 4% (what the so called experts recommend) I should be okay.

Working in Corporate America is not a viable option for most seniors even for thise who have had strong careers. I am looking, but my calls aren't returned.

One tip is that after age 62 in my state (and many others)state college tuition is free. I plan to take some language and history courses to get back some of those high taxes I paid all those years.

Bob
February 19, 2013 at 4:23 pm

Every one is different, as is their requirements. I can say this
invest as much as you can, do not be affraid to find more than 1 job. try to live BELOW your means. take advantage of every oppertunity to save money that you can, collect SS as soon as you can. Back to the story now he has 1 mill. and hes 80 so he will leave a nice pile for the family to fight over, or he can buy plenty of depends and afford a good nurseing home for awhile anyway.

Jack Teresi
February 19, 2013 at 4:21 pm

Barbara, you are full of s--t, is this really what you would do under similiar circumstances? You obviously are wealthy,and think like most of the leaders running this country.

Bud
February 19, 2013 at 3:50 pm

I'm 70 and have lost six good friends in the past five years, five of which were younger than me. Retire as soon as you can.....

Jim
February 19, 2013 at 1:46 pm

Paul, Well said, I echo your sentiments.

We are about the same age and I did the same thing as you. Telling people to wait to collect Social Security at age 70 is a farce unless you already are wealthy enough to do it. There are no guarantees in life! So if you can collect your SSI at 62 do so because as I said you don't know what your future holds even with excellent health and you will Never make up the difference as Paul said Do the math!

Paul
February 19, 2013 at 1:18 pm

I retired 7 years ago at the age of 58. Waiting until 70 to collect SS is a joke. It will take you 20 years to make up the little extra you get versus the collection of a smaller amount for many years. Do the math.
Don't EVER worry about what they will do without you! Just do your very best while you are working, and when you retire, put it all behind you.
I watched all the hard work that I had done evaporate into a horrible situation due to politics. After a couple of years, they asked me to come and fix it. I told them to go fly a kite.

Jerry
February 19, 2013 at 1:05 pm

I retired eight weeks ago at 67 I loved what I did but they kept pushing me to retire. I didn't see what they were doing at time,
as soon as I left all my work was farmed out to a company! And they have NO idea how to do the job. The funny part about this is that It's going to cost them alot to do the work? That I did for 30 years. So much for us old guys!

Raymond
February 19, 2013 at 1:03 pm

Giving the way the employers threat you after you reach a certain age and a seniority,it is not worthed to continue
your services.Therefore retirement is a privilege.Who said
that life is only working and guaranty how long you will be
around?