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Make a million bucks

By Barbara Whelehan ·
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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Jim Lialios
February 24, 2013 at 8:47 am

I am tired reading these stupid articles about waiting to collect your social security benefits until you reach 70. Please don't tell people that BS. Most of the time people drop dead at 65. Very few people are collecting all of their benefits.What are you ,SOME goverment employee? And this BS about about working until you drop dead. So your wife can enjoy your money with someone else. PLEASE ENOUGH OF THIS LINE OF bs.

February 24, 2013 at 8:26 am

Working till 70 makes no sense. I know too many people who dropped dead in their 50's, and 60's. Right now I know of someone who kept delaying retirement and now she has cancer at age 70! Welcome to retirement! As for me, I'm getting out as soon as I can afford it.
I turn 60 this year and would like to retire at 62 but probably can't afford to. I won't delay past 66.
If you don't have your health, if you drop dead within a couple of years after you retire, what's the point? All you're doing is working for Uncle Sam and the relatives who will get the money you never got to enjoy.

February 24, 2013 at 8:15 am

Yes&NO!!!!--If you 66-- you can receive full S.S+pension(from work-if they have) and work full time if you desire--Increase your your 401K to 25%-or more--this way you pay less taxes at the end of year and you're winner.You get money from S.S+more money on your 401K when you retire.Working to age 80+ is crazy--don't you have " hobby"--Most male drop before,or after that age--You pay all that money to S.S. working 40+years and not using.And last question--What you gonna do with "ONE MILLION $ at age 85--you work all your life-saving every penny--give to familly,give to charity(20%for couse 80% BOSESS)WAKE UP--Enjoy your life as you can--Enjoy!!!!

February 24, 2013 at 5:55 am

i'm working tll 62.

February 23, 2013 at 10:59 pm

I did something experts warn against, and it saved my financial life! I borrowed half my 401K balance and paid off all my credit card debt debt (most of which was at ridiculously high interest rates). My debt was due to my own mistakes and years of very low income. I repeatedly fell (hook, line and sinker) for some very predatory lending practices. Bottom line, I was reckless with credit cards, and got trapped into high monthly interest payments with no end in sight to the principal. Does this sound familiar? It should, that's exactly where the U.S. Government is right now - but I digress...
I did the math and determined that it was a wise but calculated risk to borrow from my retirement account. But it was the smartest thing I've ever done. Right now, I'm almost finished paying back the loan (to myself off the top of each paycheck). The total time to get out of 36K debt will be just under 30 months! I also got a very lucky bonus: when I took out the loan, half of my 401K was liquidated at a time when the market was very high. Right afterward, the market crashed. As a result of that and it's gradual recovery, I've made an unexpected but very large profit on the loan! This resulted because I've been buying back into the stock market out of each paycheck while the market was much lower, and now those shares have a much higher value due to the market's recovery. When I'm all done paying it off in several months, I'll have made a profit almost as large as my debt was in the first place - couldn't have planned for such a great result. NOTE: If I had been laid off during this period, of course my 40K would have suffered tremendously - but I'd still be out of debt. A calculated risk that in my case, really paid off!!! Yes, put at least 6% into your 401K, you might need some of that money, and it could be prior to your retirement. People also borrow for down payments on homes and businesses.

February 22, 2013 at 8:32 pm

A company sponsored 401K is definitely a way to go as it is tax deferred to retirement age. Yes, you will have to pay taxes to the FEDS when you withdraw but by then you will be in a lower tax bracket (that is the dream). What is really important is to research what the state will tax on your retirement income, can seriously vary from state to state. In GA your retirement income is not taxed up to $35,000.

The best thing about a company 401 for me is that I don't even miss the money out of my paycheck as I slowly increased over my career. I am not someone who is disciplined enough to save in other avenues without touching.

Luke Smith
February 21, 2013 at 11:37 am

Having a million dollars is nice, but the chances of getting to spend it if you work to age 84, when the average life expectancy for a male in the US is 82?

I hope he has a solid trust fund established, otherwise the beneficiary of all his hard work and fortune may very well end up being the U.S. government. I hope to be able to retire early and enjoy spending some of what I have earned, invested and achieved and leave the rest to my family...and I do NOT have an UNCLE SAM in my family!

February 19, 2013 at 7:45 pm

Yep, go right ahead and invest in your 401K. I lost 50% of what was in mine in 2008. You can do better. If the Fed decides they want your money and will give you a voucher, think how lucky you will be!

February 19, 2013 at 6:45 pm

Take the SS as soon as you can. The SS won't be available if you wait.

February 19, 2013 at 6:03 pm

Definitely contribute to your company's 401K..smartest thing I ever did..If you love what you do and still feel vital in your career keep doing it as long as you can...that's if you love it...If not, yes, take your social security and hopefully you have enough resources to make it. Also look for that second chance to contribute and maybe make a little dough doing something you are overqualified for , but that may need your wisdom and experience and hopefully something that is fun.