3 ways to save $1 million by retirement

One of the more popular provisions of the massive coronavirus relief packages passed by Congress this year allows Americans to . take an early payout from their 401(k)s without tax penalties. but economic experts are warning consumers not to reach for their retirement savings to make ends meet, not even in these desperate times. Despite gaining some immediate financial relief, many who dip into their retirement accounts ultimately find themselves on “an exit ramp to eternal financial sadness,” . according to Paul Ruedi, a retirement planner in Illinois, who spoke exclusively to CBS News. Ruedi emphasized that taking retirement money should always be an option of last resort, but if it was necessary, . that borrowing would be better than withdrawing because the money is paid back over time

A 2020 analysis showed that Georgians need to save an average of $187,186 to retire.

But what if you want to be a millionaire?

ExploreThis Georgia city topped SmartAsset’s best places to retire list

CNN Business has some tips on how you can save seven figures before you stop working full time.

Begin saving as early as you can

At 40, you can still be on track to have $1 million saved by retirement. According to The Balance, it’s legal for you to put away $19,500 in a 401(k) retirement plan. If you’re 50 and over, the IRS puts the limit at $26,000 for the 2020 and 2021 tax years. If there is a 7% rate of return, you’ll have a $1 million 401(k) balance in 22 years and 10 months if you annually contribute the maximum amount. You’d save over $1 million by 63.

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Choose how much to save base on your age

If you begin saving at 40, you should try to save $1,444 monthly for retirement to have $1 million saved by 65. If you start saving at 50, the goal should be to save $3,439 monthly to become a 65-year-old millionaire. This assumes a 6% return, compounded monthly.

Invest what you save

Rather than keeping your savings in a bank savings account, you can invest them. You can also invest outside a 401(k).

According to Investopedia, you can use brokerage accounts to can invest in stocks, bonds and mutual funds among others.

Traditional individual retirement accounts and Roth IRAs are also options. Traditional IRAs allow you to deduct contributions the year you make them. Once you take the money out in retirement, they’re taxed as normal income. Roth IRAs give you a tax break when you add money. Withdrawals made after age 59½ and at least five years since the initial Roth contribution are tax-free.

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