Will 2022 be the year you make progress on your goal to retire as a millionaire? The answer is yes — if you can do two things. First, keep reading. You’ll learn four easy, essential steps for building wealth in your 401(k). Second, implement what you learn. If you take action, results will follow.
1. Set smaller retirement savings milestones to reach your goal
The goal to amass $1 million in your 401(k) is a long-term one. If you’re just starting that journey, the endpoint can seem unattainable at times. To avoid feeling discouraged, try breaking up that big goal into several smaller milestones. You’ll see faster progress toward reaching those initial milestones, and that stokes your motivation.
More modest goals work best if you focus on factors you can control. For example, you can set a goal of contributing a certain dollar amount to your 401(k) this year. Or, you can commit to using 50% of your next raise to increase your retirement contribution. These are more effective goals than, say, targeting 12% growth in your portfolio over the next 12 months.
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It’s alright, too, if you’re not sure how your smaller goals roll up into the larger one. Say you feel comfortable contributing $600 monthly to your 401(k) over the next six months. But a savings goal calculator recommends a long-term contribution of $750 monthly to reach the millionaire finish line.
Accept the smaller contribution as a temporary situation, and then reassess your contribution budget regularly. That’s a better approach than not saving at all. Trust that if you keep moving in the right direction, the exact path to $1 million will present itself in time.
2. Raise your contributions
Challenge yourself in 2022 to find new opportunities to raise your retirement contributions. Here are some ideas:
- Seek pay increases. Every raise is a chance to save more for retirement.
- Pay off credit accounts. Eliminate a monthly payment from your budget and you free up cash for higher 401(k) contributions.
- Cancel unused subscriptions. Done with Apple TV? Cancel it and save an extra $5 monthly to your 401(k).
- Shop around for cheaper insurance premiums. If you can lower your insurance bill by $400 annually, you can redirect those funds into your retirement account.
Challenge yourself to raise your retirement contributions at least twice in the next 12 months. Even if the increases are small, you’re building financial discipline — and long-term discipline is the key to becoming …….