Only 46% of workers have even tried to calculate how much money they will need to retire comfortably, according to the 2013 Employee Benefit Research Institute Retirement Confidence Survey. “Most people aren’t saving, and they aren’t saving enough,” says Ruth Helman, co-author of the EBRI survey.
A strong stock market in the past two years has helped retirement accounts, but most investors have a long way to go to reach the $1 million mark. The average 401(k) account balance is $255,000 for participants age 55 and older who have been with their current employer for 10 years, according to Fidelity Investments, one of the largest retirement plan administrators.
The National Retirement Risk Index, put out by the Center for Retirement Research, finds that 53% of U.S. households are at risk of not having enough savings to maintain their living standards in retirement. “You have to make a choice,” says Anthony Webb, a senior economist at the Center for Retirement Research. “Work a lot, lot longer or save a lot, lot more.”
But reaching $1 million is not impossible, even for ordinary investors. LearnVest spoke to three everyday millionaires who grew their nest eggs through thrift and investment savvy. We asked them how they did it and what advice they would give to investors looking to follow in their footsteps.
Laurie Itkin, 44, La Jolla, Calif.
How Much She’s Saved: $1.1 million in a 401(k) plan, traditional and Roth IRAs, and a brokerage account.
How She Did It: I lived below my means; that’s the number-one reason I’ve been successful.
I created a $1 million portfolio by the time I was 40. I started investing in the stock market in 1993 when I was 24 years old, with $1,600 my grandmother left me. You have to learn by doing with investing. I started reading The Wall Street Journal every day, like my grandfather.
I always maxed out my 401(k). I put 60% into emerging markets and 40% into growth stocks, meaning stocks that have more volatility than the S&P 500. It was higher risk but offered potentially more returns. I didn’t spend one penny of my bonus, sending it straight to my retirement accounts.