If you're sitting on $100,000, congrats: That's more money than a lot of people have to their name. And $100,000 is, indeed, a very nice start on the road to building a retirement nest egg.
But chances are, you'd like to retire with more than $100,000 after all is said and done. In fact, you might even have a retirement savings goal of $1 million.
Clearly, that's a pretty lofty objective. But if you already have a solid head start, these moves could easily turn your $100,000 pile of cash into a cool million by the time your career comes to a close.
1. Leave your savings alone
When you have a pile of cash in your IRA or 401(k) plan, it can be tempting to pull money out of your savings ahead of retirement. You might, for example, want to withdraw some money to buy a home, which an IRA will allow you to do without a penalty.
Similarly, IRAs let you take early withdrawals without penalty to pay for college. If you have a child whose education fund falls short, you may be inclined to tap your retirement savings to make up the difference.
But that's a big mistake. If you want to turn $100,000 into $1 million, or any other much larger sum, then it's imperative that you leave that money where it is. Furthermore, if you take an early withdrawal for a non-exempt reason, you'll be slapped with a hefty penalty on the sum you remove, thereby thwarting your savings efforts even more.
2. Go heavy on stocks
Stocks are known to be a fairly risky investment, especially compared to bonds. But they also tend to deliver much higher returns, and if you invest your long-term savings in stocks, you'll set yourself up to turn your existing balance into a larger one.
Of course, picking stocks for your retirement plan can be daunting, especially if you don't know much about investing. A good bet in that regard is to load up on S&P 500 index funds, which are passively managed funds that aim to match the performance of the S&P 500 index itself.
By investing in these funds, you gain exposure to the broad market and can benefit when it does well. Keep in mind, too, that if you're saving for retirement in a 401(k), you generally can't hand-pick individual stocks. Rather, you'll be limited to a selection of funds, and index funds will almost always charge lower fees than mutual funds that are actively managed.
3. Delay your retirement if you have to
If you're sitting on $100,000 in your 30s, you might not need to pump another dime into your retirement plan to reach a $1 million savings balance. In fact, if you leave that sum alone for 30 years and your investments generate an average annual 8% return, which is a few percentage points below the stock market's average, you'll have just over $1 million to enjoy.
If you're a bit older, however, then you may need to think about postponing retirement to give your money more time to grow. The good news? Delaying that milestone will afford you the option to pad your nest egg even more if you need help getting toward that $1 million goal.
A $100,000 savings balance might seem far off from $1 million, but with the right strategy, you really can grow it that much. And that could, in turn, set the stage for the retirement you've always wanted.
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