You might need $1 million to retire comfortably. Even with that much, the 4% rule would allow just $40,000 per year in retirement account distributions, and Social Security benefits can only add so much. Luckily, there are a few different strategies to help you build wealth toward that millionaire retirement goal.
This is the simplest option by far, but it’s going to require patience. Index funds are designed to deliver that performance. There are numerous low-cost ETFs and mutual funds that you can invest your 401k, IRA, or brokerage funds.
There’s nothing exciting about tracking the market, but it’s a proven strategy for passive investors. Stock market growth is never smooth and linear, but it does tend to average a nearly 10% annual return over the long term. There are crashes and booms along the way, but the overall trend line has been reliable.
If you can achieve an 8% compounding annual rate of return on $100,000, it will take 30 years for that capital to grow into $1 million.
However, there are no guarantees with this approach. Index investors have to resist the urge to panic and sell their stocks during corrections and market crashes. The strategy can also be sabotaged by greed. Chasing growth stocks near the top of a market cycle is a great way to magnify losses. You probably also have to pay fees and taxes along the way, depending how you invest, so your net returns might fall short of the average.
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