Laura Beck
Aug 19, 2024
Anthony DeLuca, an expert contributor for RetireGuide.com, pointed out the power of maxing out tax-advantaged accounts like IRAs. “If you max out the IRA each year (assuming the maximum stays at $7,000), for 40 years with an annual return of 7.0% (roughly the S&P average over the last 25 years after inflation) you will have an ending value of $1.3 million,” he shared.
The article highlights that building wealth doesn’t require a large fortune; with consistent and strategic investing, even small amounts can grow substantially over time. Financial experts share practical advice on how to accumulate wealth by investing as little as $100 a month.
Key Strategies:
Start Early and Be Consistent: Aaron Cirksena, founder and CEO at MDRN Capital, emphasizes the power of time and compound interest. He illustrates that if someone starts investing $100 a month at age 25 and continues until age 65, it could grow to over one million dollars.
Focus on Your Savings Rate: Brandon Galici, CFP and founder of Galici Financial, advises focusing on your savings rate rather than a fixed dollar amount. He recommends a savings rate between 10% and 20% of income, explaining that on a $75,000 annual income, saving 10% equates to $625 per month, while 20% equates to $1,250 monthly.
Leverage Tax-Advantaged Accounts: Anthony DeLuca, expert contributor for RetireGuide.com, highlights the importance of maximizing tax-advantaged accounts like IRAs. He notes, “If you max out the IRA each year (assuming the maximum stays at $7,000) for 40 years with an annual return of 7.0%, you will have an ending value of $1.3 million.”
Gradually Increase Your Investments: Galici advises starting with a small percentage of your income and gradually increasing it. For instance, increasing your savings rate by just 1% on a $75,000 income amounts to $750 per year or $63 per month.
Automate Your Investments: Galici also recommends automating your investments to ensure consistency. Automatic transfers prevent the temptation to spend the money elsewhere, making it easier to stick to your savings goals.
The Power of Long-Term Investing:Galici provides a breakdown of potential savings with consistent investments and an 8% annual return:
$930,000 at $625/month
$1.4 million at $938/month
$1.85 million at $1,250/month
These strategies demonstrate that even modest, consistent investments can lead to significant wealth over time.