Countless Americans aspire to retire at age 62 . If you want to retire wealthy and enjoy a long and happy retirement then follow “10 Golden Rules If you want to Retire Rich”. The good news is, you can make that dream a reality, but it will take some effort, planning, and self-discipline. And you can begin by following these 10 golden rules if you want to retire rich & have a sizable nest egg.
Rule 1. Start Saving as Early as Possible
If you want to retire rich, you need to start saving right now.
The truth is, the earlier you start putting away your hard-earned money, the better your chances are to build wealth and be rich by retirement. By saving a little money with each paycheck, compounding interest can help you accumulate larger savings as time goes by.
Of course, it’s not always possible to be a conscientious saver and to spend frugally. Emergencies and unexpected situations tend to crop up in even the most well-planned life, and these events can whittle your savings away if you’re not careful.
But a hypothetical example can illustrate just how far a well-considered savings plan can go toward helping you retire wealthy. Say you were to begin saving your money in your early twenties, at around $100 each month. By investing this amount in a retirement fund, and with an average investment return of 8%, you could be looking at more than a half-million dollars saved by 65.
Meanwhile, if you wait until your forties to begin saving the same amount each month, your return by the age of 65 will be closer to $100,000. So when you start saving makes a real difference for your retirement. Start socking away that money as soon as possible.
Rule 2. Don’t Spend More Than You Earn
A corollary to the first Golden Rule for retiring rich is this one: never spend more than you earn.
That’s a tall order, of course, and there are times in life when you may be forced to spend much more than you’re making. But as a general rule of thumb, you’re not going to build wealth by spending more than you’re taking in.
And we see the truth of this axiom in everyday life. Profligacy is a sure way to find oneself in the poorhouse. If you’re lavishing money on unnecessary luxuries, on expensive cars and houses you can’t afford, you’re not going to be accumulating the resources you’ll need in later life.
Worse, you’ll be saddling yourself with crushing debt, and most of what money you earn will end up going toward interest payments alone. So the key to becoming a millionaire is to start putting money in the bank.
You can begin by developing a savings system that works for you. A good idea is to spend only about 90% of the money you’re making, and save the leftover 10%. If you have no savings at all, begin by establishing an emergency fund in a savings account. Add money to this fund until it’s full, and then you can start to invest the 10% savings in a retirement fund.
Rule 3. Invest Extra Money
So what if you’re nearing retirement age, and you haven’t saved quite as much money as you’d hoped. Does that mean you’ve missed your chance to retire rich?
Not at all. There are still plenty of opportunities for those who are 50 years of age or older to accumulate resources and still be rich by retirement. For instance, you can make catch-up contributions to your retirement fund by the end of each year.
For instance, you have the opportunity to tack on an additional $6,500 to a workplace fund such as a 401(k), amounting to a total of $26,000 for the annual contribution. You can also make catch-up contributions to a traditional or Roth IRA to the tune of $1,000, for a total contribution of $7,000 a year.
Your initial response might be that contributing that kind of money is well beyond your means. But you shouldn’t give up hope, or overlook sudden and unexpected windfalls and other sources of cash.
For instance, you might downsize your home, or move to an area with lower property values or a lower cost of living. Maybe you’ll downsize in other areas of your life, and sell off unneeded stuff like unused exercise equipment, an extra car, or a boat that you don’t use anymore.
If this is the case, don’t spend this money on more junk. Invest it in your retirement accounts and start building your wealth for later in life.
Rule 4. Reduce Your Taxes
If the key to becoming a millionaire is to save and invest your money wisely, it’s safe to say that staying a millionaire means finding ways to keep the government from taxing your wealth.
It’s fortunate that there are plenty of ways to do this. And we’re not even talking about fancy tax shelters.
The key is to take advantage of accounts that are shielded from taxes when investing retirement funds. This includes the standard IRAs and 401(k) plans.
When you contribute money to traditional retirement funds, both the money and any earnings they may generate over time are shielded from taxation until the money is withdrawn. So the longer you can keep money in these accounts, the more you’ll have to work within your retirement.
On the other hand, Roth IRAs and Roth 401(k) plans work a little differently. These funds are taxed upfront, and the subsequent earnings and withdrawals are tax-free. Deciding on a traditional or Roth retirement plan is something that you should discuss with a financial advisor.
In general, Roth plans are best for younger investors. By the time you reach retirement age, you should be making more money than when you were younger (that’s the idea, at least). So you may want to take advantage of the lower tax rate you’ll pay now, rather than the higher one you’ll be paying in retirement.
The point is: don’t overlook tax planning as part of your retirement strategy in order to Retire Rich
Rule 5. Don’t Overlook Free Money
How do the rich become rich in the first place?
Well, one thing’s for sure—they don’t overlook free money when it comes their way. So why would you not avail yourself of a 401(k) employer match? This is essentially free money, and you’d be foolish not to take advantage of it.
The only catch that comes with this “free” money is that you need to make contributions to the retirement fund as well. And the truth is this isn’t really a “catch” at all. If you’re interested at all in retiring rich, you’re going to have to save money and contribute to a retirement fund anyway.
This way, you have a further incentive to force yourself to put away money so you can build wealth. And if your employer offers 401(k) matching funds, you need to sign up for that program right away.
Rule 6. Invest Wisely
It can be tempting to try your luck on the stock market, or in high-risk, high-reward investments.
But playing the stock market in this fashion, or risking your retirement on uncertain investments, can be a sure way to lose all your savings and derail your dream to retire rich. You’re essentially gambling, and in many ways, it’s no different than wasting your money playing the roulette tables in a Las Vegas casino.
In short, you need to learn to invest wisely. Develop a workable investment strategy that meets your financial needs and goals without exposing you to excessive risk.
Identify intelligent risks, like investing in emerging-market funds. At the same time, avoid less intelligent risks, such as investing all your hard-won savings in cryptocurrencies.
The key is to do your homework, and research all investment opportunities. You should have a threshold of acceptable risk that must never be exceeded. Also, as a younger investor, you can accept a greater degree of risk than if you’re nearing retirement.
Rule 7. …But Don’t Be Afraid of a Little Risk
Of course, a wise investment strategy doesn’t mean eschewing all risk.
If you want to be rich by retirement, it’s inevitable that you’ll have to invest your money at some point. You can play it safe by only investing in secure bonds, and rest easy knowing that you’ll likely not lose any money.
But you won’t make much money either. This is why it’s critical to incorporate an investment strategy into your retirement plans. Investing in stocks and real estate are tried-and-true methods that have served investors well in the past.
Of course, there is always a risk. As we’ve seen in recent decades, the housing market can collapse and the stock market can tank at the least opportune times. But in general, these are investments that can realize big gains with a smart investing strategy.
And while we suggested not investing all your money in cryptocurrencies in the previous Golden Rule, it can still be an option as long as it’s done wisely. Some financial advisors recommend including digital securities—like Bitcoin and other cryptocurrencies—among a broader investment portfolio.
Rule 8. Don’t Follow the Herd
The slow and steady route is ideal to build wealth over your lifetime and retire rich. And the key is to not follow the herd.
It’s a problem illustrated by the ’08 stock market crash—to say nothing of the Great Crash in ’29. Fear and panic spread like a contagion, and it turns a worsening situation into something that is truly catastrophic.
Once the rumor mill starts, people start to sell their investments as market tanks. In many cases, this means selling at a considerable loss at the market’s lowest point. But doing so means these people miss the opportunity to gain big when the market inevitably rebounds.
This is no way to behave if you expect to be rich by the time you retire. You have to buck the trends and avoid the instinct to bolt in the same direction as the rest of the herd. Keep a cool head, ride out the panics and the bubbles, and avoid investing mistakes.
If you follow 10 golden rules to be rich by retirement, when the situation rights itself, as it always does, you’ll be the one who’s in a position to make money in the changing circumstances.
Rule 9. Increase Your Income Potential
This rule might seem obvious, but it bears repeating.
The key to retiring rich is to maximize your earnings potential. And you can’t do that if you continue to settle for a job that’s going nowhere, and pays paltry wages.
Throughout your career, you need to find ways to grow your income. This means finding new jobs, or seeking out promotions and advancement whenever possible. After all, the more money you’re earning, the more you can sock away for your eventual retirement.
Consider extra training or further education. These credentials can help you secure that higher-paying job. Or think about availing yourself of workforce development solutions to help accelerate your career.
There’s every reason to better your situation in life, and a stable, higher-paying job is the best way to boost your income and grow your retirement wealth.
Rule 10. Remain in the Workforce
Finally, we come to the last Golden Rule to retire rich.
And there’s a good chance it’s also the least popular rule on our list. Yes, one of the best ways to retire wealthy is to remain working for as long as possible.
It’s possible to retire and start withdrawing Social Security benefits as early as 62. But this limits the amount of money you’ll be receiving each month. The longer you can continue to work, the more money you’ll have after retirement.
Plus, as soon as you hit full retirement age, your retirement payouts increase for every additional year you continue to work. This is a nice incentive—but it only works until you hit your 70th birthday.
The feasibility of this option will depend on your situation. If you’re fed up with working by age 62, the additional money may not matter all that much to you. But if you enjoy your job, or just wouldn’t know what else to do with yourself, delaying retirement for a few years might be appealing.
Follow These 10 Golden Rules to Retire Rich
When you’re just starting out in life, the ambitious goal to retire rich can seem unattainable.
But nothing could be further from the truth. All it takes is some dedication and self-discipline, and a commitment to achieving your retirement goals.
Becoming a millionaire by the time you retire is entirely possible. All it takes is a financial strategy and dedication to following these ten Golden Rules.
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