How To Do Just About Everything
By eHow Personal Finance Editor
Rate: (8 Ratings)
Making $1 million is not as difficult as it used to be, but you will still need to plan carefully, sock away a lot of money and invest wisely to achieve your goal.
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Comments
Anonymous said
on 8/22/2006 First, don't forget to roll your 401k into your IRA when you leave your employer. Second, IRS rule 72T allows you to make penalty-free withdrawals from your IRA (I'm assuming a traditional IRA not Roth) prior to age 59 1/2. This is not well-known. There are some caveats, but they are doable. This will increase your retirement income before you can collect Social Security. Many of us will need this "bridge" money. Start building (in your taxable account, not in your IRA and not in your 401k) a portfolio of municipal bonds. They are double-tax free (buy only municipal bonds tied to the State where you live to get double tax free) and will contribute to your "bridge" income without paying taxes. Don't listen to the brokers who tell you municipals can go up/down in value. You plan to collect interest and not cash them in, so the value is not as important. When the bond matures you collect your original investment (or roll it into another bond). There are more details to bond investing, so I recommend a broker who specializes in bonds. Assuming you buy investment grade bonds or better, you can sleep well at night. The folks owning stocks are worrying about the market up/downs. One more thing, until you actually need the bond income, use the municipal-bond interest income to buy additional bonds.
More thoughts:
1) Make a plan to payoff your mortgage in 10 years of less. A basic amortization spreadsheet will be able to tell you how much extra to pay each month to achieve this goal. Usually, it is only $200 to $300
2) Plan to pay off all debt and stay that way.
I started my 10 year mortgage payoff plan in 1993 and was able to do it early in 1997 just by paying more than necessary to reach my goal. I didn't "flip" house or try to outsmart the real estate market. Just paid off the debt early. With the extra money after the mortgage was paid off, I build a good-sized portfolio of municipal-bonds in less than 10 years (1997 to 2006). Now I work a little to stay active not because I have to.
Anonymous said
on 11/22/2005 As the "Rule of 72" shows us, if you start at an earlier age, you don't have to invest as much. If you start at age 25 as opposed to age 30, you won't need such a high rate of return (a 15% rate is really high).