3 ways to turn $100,000 into $1 million for retirement

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People are often misled into believing that it is possible to retire comfortably on Social Security alone. In reality, these benefits probably pay less generously than you would think.

Also, Social Security may have to cut benefits if lawmakers don’t find a way to address the program’s looming solvency problems. When that happens, seniors become even more dependent on outside sources of income to maintain a decent lifestyle.

For that reason, it’s a good bet to just assume upfront that you’ll need a healthy amount of savings to retire comfortably. But one thing you don’t need to do is contribute millions to your IRA or 401(k) plan out of pocket. Even if you only manage to pump a total of $100,000 into your retirement over the course of your career, you can still grow that sum to $1 million or more—if you follow these three tips.

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1. Live below your means

In order to make any amount of money for your savings, you must make a habit of living below your means. And the sooner you do this, the easier it will be to consistently pump money into your retirement savings.

A good way to ensure you manage to get money into your IRA or 401(k) is to set a budget that spends less than your entire paycheck. In fact, you should create a line for retirement contributions in your budget to keep you on track.

2. Start investing from a young age

The earlier you start investing your money, the more opportunities you have to benefit from compound interest. As your portfolio increases in value year over year, you have the option to reinvest those gains into your IRA or 401(k) for additional growth. So it pays to start financing your savings at a young age.

Of course, many new hires can’t raise money for retirement because they’re busy paying off college debt and building emergency funds. But once you’re in a stronger position financially, it definitely pays to make IRA or 401(k) contributions a priority.

3. Get aggressive when time is on your side

Investing in stocks involves risk. But also investing too conservatively.

If you choose the latter route, you may find that your nest egg falls short and you end up cash-strapped in retirement. But if you load up on stocks at a relatively young age, you can enjoy nice growth in your portfolio and switch to safer investments as retirement approaches.

To be clear, when we talk about investing in stocks, it doesn’t necessarily mean that you have to pick individual companies yourself. If that’s out of your comfort zone, you can always load broad market index funds instead.

think big

You should expect to rely more on your own savings than Social Security to maintain a comfortable retirement lifestyle. If you’re living below your means, starting saving at a young age, and investing heavily in stocks, you’ll put yourself in a great position to retire with a large enough nest egg to meet your retirement goals.

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