The number of retired millionaires grows each year. While millionaires themselves debate how much they will need to achieve a secure living in retirement, hitting that million-dollar mark is the goal of many Americans as they approach retirement age.
According to the largest survey of millionaires ever, Ramsey Solutions found 75% said that an extended period of regular investing is the secret of their success. “Most of them did it through consistent investing, avoiding debt like the plague, and smart spending,” the study claimed. “No lottery tickets. No inheritances. No six-figure incomes. Really.”
When Business Insider asked financial planners how their millionaire clients retired without traditional retirement funds, their answers were unequivocally straight-forward and off-risk.
Avoid Debt at All Costs
Unfortunately, most Americans live in debt. But if you want to successfully build your financial future without relying on traditional retirement accounts, you have to kick debt to the curb.
“The people who’ve managed to build up a $1 million-plus net worth, without using a 401(k) or IRA, have managed to carry very little debt during both their working years and once they hit retirement,” financial planner R.J. Weiss told Business Insider. “This is important, and not to be understated, as one without constant debt payments throughout their life can take more risk with their overall portfolio.”
Faron Daugs, founder and CEO of Harrison Wallace Financial Group, stressed that using dividends, interest or any other form of income distribution earned to purchase additional shares or units — especially if you aren’t going the traditional retirement fund route — is important.
“The key is to keep the reinvestment going and be disciplined about putting money back into successful businesses, real estate projects, or into stock market-related investments from cash flow created from rental and other business activities,” said Daugs.
Live Below Your Means but Within Your Means
Millionaires have the funds to feasibly buy anything they want, but most made their money by spending much less than they earned. This is sound advice for any budding millionaire. Living within a narrow budget, reducing spending and prioritizing financial goals like saving and investing will pay dividends down the road when wages end and retirement spending starts.
Create a Source of Passive Income
As Time noted, earning money outside you job can be possible and profitable through things like renting out real estate or a parking space and earning commission from affiliate marketing. “This may include a small business they were responsible for building throughout their life that is now run by family members,” stated Weiss. “Yet, it still pays out a salary even if the owner is no longer working in it full-time. Or, it could be a diversified mix of cash-producing real estate that the retiree has built up throughout the years, one property at a time, and which is currently being rented out and bringing in monthly income.”
Traditionally, retirement planning is investment-focused, centered around Social Security benefits, 401(k) contributions and individual retirement account (IRA) strategies. However, the key to retiring a millionaire may depend more on maintaining unconventional, non-traditional saving habits than most people assume.
Retiring as a millionaire is within the reach of the average investor if you stick to some hard and fast rules. Investing early and consistently is always a recommended strategy, but oftentimes, the blueprint for becoming a millionaire and retiring as one involves living below your means and staying out of debt.
More From GOBankingRates