Becoming a millionaire by retirement is a goal shared by many Americans, and accomplishing it can go a long way toward giving you the financial security you deserve in your later years. Unfortunately, many seniors enter retirement with savings account balances well below that $1 million number.
The big question for you is, will you be one of the many who fall short of saving a seven-figure nest egg, or is it within your reach to earn millionaire status? If you’re not sure, these five signs suggest becoming a millionaire isn’t in the cards for you — at least not unless you change your habits.
1. You aren’t banking your raises
To amass a nest egg of a million (or more), you’ll probably need to save a healthy percentage of your income, with the specific amount depending on how much you’re earning and how old you are when you begin investing. It can be hard to hit the necessary percentage, but one of the best ways to do it is to increase your retirement account contributions as soon as you get a raise. If you earn a 2% salary bump, for example, raise your retirement contributions by 2% (or close to it) before you get used to living on the additional money.
If you aren’t saving your raises and reinvesting them for your future, you’re missing out on a prime opportunity to effortlessly achieve the kind of savings rates needed to end up with $1 million. Unless you’re already on track to hit that target at your current savings level, failure to make good use of your salary bumps is a key sign you probably won’t save seven figures.
The good news is, this problem is easy to fix. Next time you get a raise, just commit to invest it for your future instead of spending it. Arrange to have the added funds automatically transferred to your 401(k) or IRA before your first larger paycheck comes — and keep doing that for any subsequent raises until your savings rate is high enough that you’re sure to amass $1 million in wealth.
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