How to become a millionaire? Increase your wealth? AFTER retirement? Um… No way you might say.
So many retirement articles talk about how to make ends meet in retirement. And, most of us are indeed worried about running out of money and ask: “Will my savings really last as long as I do?” However, maybe we are all asking the wrong question. Retirement does not necessarily need to be a time of decreasing wealth.
You can actually improve your financial status during your golden years.
Read below to discover how to become a millionaire (or increase your millions) AFTER retirement.
Know What You Have and What You Need to Spend
If you want to improve your wealth leading up to and after retirement, you need to have a really good understanding of what you have and what you will need.
Retirement planning can be complicated — you need to think through your next 30 plus years in great detail. However, new tools make it easy. The NewRetirement Retirement Planner takes you step by step to figuring out what you have now and all of the big points and fine minutiae of your future finances.
Make Adjustments to Your Lifestyle, But Keep Working
Baby boomers are redefining “retirement.”
Many of us are now thinking of retirement as a period of life where take more control over our time — not simply the absence of work.
Can you keep working and saving your million dollars but enjoy more of your time now. Could you:
- Take longer vacations?
- Go part-time?
- Take a sabbatical?
There are so many financial as well as emotional, intellectual and health benefits to work. Explore:
Start a Business
You have probably heard countless stories of people who quit their jobs, start doing what they love and make it big — like millionaire big.
If you are financially ready for retirement, but not quite ready to hang up your hat, starting a business can be a fulfilling way to spend your time and potentially increase your wealth.
You can start a consulting business or turn a hobby into a money-making opportunity. Learn more about Starting a Business After Retirement, 12 Business Ideas for the Over 50s.
Take Risks with Your Assets
While you probably should not put money at risk that you are really going to need to spend in the next ten plus years, you can and probably should take some risks with other assets. You can double your money over about a 20-year period if you average a 4% return.
Your retirement portfolio should be carefully crafted to give you:
- Growth you need so that the buying power of your assets keep up with an inflationary economy
- Peace of mind that you won’t lose the money you need to spend
- Growth for growth’s sake so that you can potentially become a millionaire.
Bud Hebeler was an early advisor to NewRetirement. He lived in retirement for 27 years and during that time he not only gave away more than the savings he started with he was also able to leave behind more than twice as much as he had at the start of his retirement. His advice on riskier investments was this:
I chose to modify the common stock allocation rule when I was young. Years ago, it was common to use a formula of 100 minus your age as the recommended percentage to hold in equities (stock and investment real estate). It was recommended that the rest be in fixed-income (bonds, CDs and money markets).
I chose to modify the common stock allocation rule when I was young. Instead, I used a target allocation percentage each year for our stock fund allocation of 105, not the then traditional 100, less my wife’s age because she is younger. In the year when she was 40, our stock allocation target was 65% while at 70 was 35%. But the new wrinkle was to not do any reallocation unless the allocation got more than 5% off target. This really helped in the stock boom years and did not hurt me badly when prices fell. Another plus was that I only had to rebalance about every other year. I spend very little time working with investments.
Do Cut Expenses
Most self-made millionaires didn’t get there by spending lavishly. And, if you want to increase your wealth in retirement, you may need to cut your expenses in order to rely less on your assets.
The less you need to withdraw from your savings, the more time you have and risks you can take with that money to enable it to grow.
In addition to cutting daily expenses, you may want to really consider the big-ticket items in your budget: housing, transportation, taxes and medical expenses.
Downsizing can be the biggest way to significantly reduce your budget.
Think About Bonds and Bond Ladders
Bonds and bond ladders were one of his success strategies. Hebeler wrote: “One of the odd things I did that was consistent with the professional retirement advice, but not specifically recommended, was to buy Savings Bonds for much of the bond portion. Back then, the Savings I Bonds were paying around 2% to 3% coupon plus whatever was the annual inflation rate. And unlike other bonds, they benefited from both deferred taxes and inflation adjustments…
After I converted my company’s 401(k) to a Roth IRA, I bought laddered Treasury Inflation-Protected (TIPS) so that our bonds would not have any tax, and the laddering was such that a bond matured every year of our retirement, as do our Savings Bonds.”
Consider Professional Advice
As super savvy as Hebeler was, he still credits professional advice for at least some of his financial success. He wrote:
I give large credit to the professional retirement advice I had when still working with regard to investments, specifically to buy low cost index stock funds and actual bonds, not bond funds, for our fixed-income allocations—and make a financial plan to determine how much we should save.
Have you considered working with a financial advisor? NewRetirement Advisors is a new service that aims to make working with an advisor easier, more fun and very cost effective. This advisory service uses the NewRetirement technology platform to collaborate with clients for strong financial outcomes — maybe even millionaire status.
Start with Conservative Assumptions
Hebeler was a big fan of planning very conservatively. His baseline plan was set to have high inflation rates and low rates of return. And, to also be adequately insured. This protected his downside risk.
He could then make adjustments throughout his retirement.
I strongly urge people to do serious retirement financial planning with conservative inputs. The future will not turn out the way we may expect because we don’t know how long we will live much less what the rates will be for taxes, returns and inflation, but the ability to be financially stress free in retirement may turn out one of the biggest blessings you can have.
The NewRetirement Planner lets you set your own assumptions. The tool can help you know what might be conservative or aggressive, but you get to choose:
- General inflation rates
- Medical cost inflation rates
- Housing appreciation
- Investment returns on individual holdings
- Your own longevity
Playing with these assumptions in the Retirement Planner is a great way to familiarize yourself with the strength and risks to your current plan and reveal opportunities for increasing your wealth.
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