You may have heard about the meatpackers in Nebraska who won the biggest jackpot in U.S. history last week. When asked what he would do with his winnings, one winner said, "I've been retired for about four days now." I wasn't surprised by his answer; I'm sure I would have done the same thing!
What does surprise me is that many Americans think they can't retire comfortably unless they win the lottery. A survey by the Consumer Federation of America found that 27% of Americans think that winning a sweepstakes or lottery is their best chance to get $500,000 in their lifetime.
Building a comfortable nest egg for retirement is easier than you might think. Here are five things you can do to prepare for a comfortable retirement:
- Make sure your costs are low. Invest in mutual funds with low costs and no loads (or other investments). If you cut your portfolio expenses by just 1%, you could have 20% more money in your portfolio after 20 years.
- Put your money into a diversified mix of stocks and bonds that fits your goals and how much risk you are willing to take. Studies show that the allocation of your assets, not the specific investments you choose, is the main factor that affects the return on your investments.
- Plan ahead. The best way to make sure that your retirement will be comfortable is to plan how much money you will need. If you don't know where you're going, you won't get where you want to go.
- Get going early! If you started saving $100 per month when you were 18 years old, you would have more than $500,000 when you were 65 years old. Compounding has a lot of power, and the earlier you start saving, the more you'll get out of it.
- Take part in the retirement plans that your company offers. Many companies match the amount you put into your 401(k) or other retirement plan. This money is free, so take it!
Even if you win a lot of money in the lottery, if you follow the steps above, you should be well on your way to a comfortable retirement.
