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One of my favorite Warren Buffett quotes: “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”
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Most people think building a million-dollar retirement fund takes a six-figure salary and a streak of lucky investments. But I’ll be honest — my wife and I didn’t do anything flashy to reach millionaire status.
We just invested a tiny bit from every paycheck, month after month, year after year. Time and compound interest did the heavy lifting.
The single best move we did was automating our savings. And it’s the first thing I recommend to friends who want to stop stressing about retirement and start building solid wealth.
Small amounts lead to big results over time
How much you save doesn’t matter as much as how consistently you invest over time.
Here’s an example of what compound growth can achieve when you invest $400 per month with an average 8% return:
|
Time Invested |
Future Portfolio Value |
|---|---|
|
10 years |
$69,535 |
|
20 years |
$219,657 |
|
30 years |
$543,759 |
|
40 years |
$1,243,471 |
|
50 years |
$2,754,096 |
Data source: Author’s calculations.
Crazy, right? Saving just a hundred bucks a week could grow into over $1.2 million over the course of your career. Double it to $800/month and you can hit millionaire status a full decade sooner.
The reason I used an 8% annual return is because it’s slightly below the S&P 500’s historical average over the long term. It’s not guaranteed, but it’s a widely used benchmark for long-term investing projections.
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The beauty of automatic contributions
You probably don’t notice Social Security or Medicare tax coming out of your paychecks currently. It just happens automatically.
Now imagine doing that with your own retirement savings.
Each month, set up automatic, consistent transfers directly into investment accounts. It might sting the first couple times if you’re not used to saving, but you’ll eventually get used to living with a smaller paycheck and barely think about it.
That’s why auto contributions work so well. Your savings become “invisible” and grow in the background.
This was me and my wife’s trick. We set up recurring transfers into our retirement accounts and let the system take care of it. Over the years, those tiny deposits snowballed into something huge.
Where to stash your automatic investments
It’s smart to take advantage of tax-friendly accounts. This can help supercharge your growth and provide some tax relief.
Here are the easiest places to start investing regularly.
401(k) plan
If your employer offers a 401(k), this is a great first step for saving. Contributions happen before any money hits your bank account. Many companies offer a matching incentive (which is basically free money).
Roth or traditional IRA
Roth IRAs let you invest money you’ve already paid taxes on and enjoy tax-free withdrawals in retirement. Traditional IRAs give you a tax break now, but you’ll pay them later when you take money out. Either type is easy to set up and allows automatic transfers from your bank. Set up your first IRA with one of these top-rated brokers.
Brokerage account
Standard brokerage accounts have no tax perks. But they are the most flexible because you can invest as much as you want and access the money anytime. It’s a great option once you’ve maxed out your 401(k) or IRA accounts.
My wife and I are finance nerds, so we use all of these accounts for investing. But no matter which ones you use, it’s the habit of automatic contributions that is most important.
Don’t rush the process. If you stay consistent, your money will grow steadily and eventually multiply on its own.
And if you’d like some guidance, it can be really helpful to connect with a professional. A short questionnaire from our partner, SmartAsset, helps match you with up to three fiduciary financial advisors, each legally bound to work in your best interest.
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