By Craig Erwin, Ph.D.
During the darkest days of the pandemic many people near retirement age decided to retire prematurely. Terrified that continuing to work might kill them, they thought it better to retire early than to die trying to save a little more money. Besides, the stock market had been performing admirably, so many felt well off. Then came 2022 and everything changed. Inflation soared and the stock market sank. This caused retirees and those considering retirement to consider if they could afford to retire (or stay retired).
Clearly it’s a tough time to retire. The economy looks awful, perhaps ready to tip into recession, or perhaps already in recession. Retirees and would-be retirees are caught between a rock and a hard place. They feel compelled to return to (or stay in) the workforce because they are worried about their finances and the ravages of inflation, but they fear they’ll contract Monkeypox or a Covid-19 variant if they work. There is always uncertainty, but this seems like a particularly dangerous time and a difficult time to live on a fixed income(unless you have millions).
If you accumulate several million dollars by the time you reach retirement age, you won’t have to worry about whether you can afford to retire. But, is it possible to accumulate several million dollars by retirement age? Yes. Although far too many people accumulate next to nothing by the time they reach retirement age, many others become millionaires. According to Investopedia, in 2021 there were almost 22 million millionaires in the U.S. How did they become millionaires? Tom Corley, accountant, financial planner and author found that it is common to take one of five paths to becoming a millionaire: 1) saving religiously and investing, 2) starting a business, 3) becoming a successful author or entertainer, 4) climbing the corporate ladder, or 5) becoming exceptionally good at what you do and being highly compensated for it (e.g., doctors, lawyers).
It may not be too late for you. Figure out which of the paths listed above you can best take to accumulate enough wealth to retire. Even if you lack most of the skills and opportunities identified by Tom Corley above, if you have a steady income, you can save aggressively and invest in index mutual funds. But you need to get started ASAP because that route to wealth takes decades.
How will you make your millions? Are you concerned that you might not have enough to retire? If so, what can you do about it?
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