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Retirement Savings Advice from a Self-Made Millionaire

Retirement Savings Advice from a Self-Made Millionaire

At just 36 years old, self-made millionaire and finance guru Ramit Sethi might not be the first person you’d think of turning to for retirement advice. However, he recently offered his advice to CNBC and it is something all Americans need to hear.

The average U.S. citizen has only about $5,000 saved, believing that retirement savings can wait until later in life. However, if you are interested in providing yourself with a comfortable ride in your golden years, with plenty to pass onto your children, then this is a bad attitude to take. Sethi’s advice is so simple, yet will ensure you enter retirement wealthy and secure.

Set a Retirement Date

Rule No. 1 for setting targets is to have a deadline. Without a specific date in mind for retirement, it is impossible set a measurable and achievable goal. When you have a date, you can enter it into a computer, which will do the work for you.

Sethi describes this target-date fund to CNBC like this:

“The computer knows how old you are; it knows roughly when you’re going to retire — let’s say 65 [years old] — and then it creates a nice portfolio for you.” Once you have the exact date noted, you can easily add up how much you will have by retirement if you put a certain amount aside each month. This acts as a motivation to keep on contributing.

Keep Things Simple

One of the biggest roadblocks to getting a proper savings plan in place is confusion over which system is the best. This is why Sethi promotes the target-date fund. It is a simple way to invest money without too much input from you. All you need to do is top up the funds and they will be distributed for you in a way which lets your finances grow and maximizes your final savings amount.

It can be easy to seek out a savings option which allow for customization. You might believe this offers a greater level of control and therefore gives you the chance to earn higher returns. However, your time while employed should be dedicated to work. Keep your savings plan simple and let the compounding interest speak for itself.

Invest “As Much As Possible”

There are many ways to save money, but it all comes down to being willing to part with your cash. By having a specified target date, you can work backwards and figure out exactly how much you can afford to save. Once you have done this, Sethi recommends that you save “as much money as possible, every month, consistently, automatically and that fund is just going to grow and grow.” This is the only way to guarantee a healthy retirement fund.

The vast number of savings options on offer can be overwhelming and cause investment paralysis. Take the advice of the wealthy and keep things simple. Save early, often and regularly by being specific about the date you intent to retire. This is the single best piece of advice for a healthy and wealthy retirement.