Financially Set or Seriously Rich?

This piece from the Motley Fool asks: which would you rather be in retirement -- financially set or seriously rich? But before you answer, consider the "cost" of each. First, here's what you have to do to retire financially set:

Fund your IRA. Each year, every year, put money into an individual retirement account. And here's the caveat: You should fund your IRA as soon as possible each year. Don't wait to do it until the April deadline, which the tax code allows. Do it as soon as you possibly can. The difference in the time value of that money for every single one of those dollars having an additional 15 to 16 months to grow is astounding. Over a 20-year period, the simple act of funding as early as possible rather than waiting for the last moment can mean a difference of $12,000 or more. This will only increase as the annual investment limits increase from $4,000 to $5,000 in 2008.

And here are the three things you must do to become seriously rich in retirement:

1. The first step to wealth, interestingly enough, is the one we've just talked about. In order to have money to invest, you must first accumulate that money. Save, save, save. Once you've funded an IRA, you can also put money into your brokerage account.

2. Learn.

3. Determine when the market is overestimating a risk and when it is underestimating it.

I'm with them all the way on the financially set idea. Better yet, it's something we can all do (pretty much). If we simply save a regular amount over a long period of time, we'll do well at retirement. Yes, it's that simple. If you don't believe me, read The Real Retirement Secret (How to Maximize Your Retirement Savings), Getting Rich is Simpler than You Think Getting Rich is Simpler than You Think, and How Average Joes Can Retire Rich. They'll explain everything in detail.

My "seriously rich" idea would be to simply do more of the first idea (or do it better). Fully fund your 401k (getting all the employer match you can) and save as much as you can in taxable accounts too by spending less than you earn over a long period of time. This is the one way to wealth that almost everyone reading this can accomplish. All it takes is discipline and time.

Comments

[Dus10]

I think that this is right on. Saving more, saving earlier, and saving often. Once you get in this habit, it is all the better. Then, you can start looking into keep more of that money through reducing your investing fees, and optimizing your tax strategy.

I think retirement accounts are great. However, I think too much emphasis gets placed on investing through them. It really needs to be a multi-pronged approach. Anything that you earn in your retirement accounts is inaccessible without some ramifications. And in most cases, besides Roths, you cannot touch your contributions without the same reprecussions. I really like the idea of something that you can count on today; it is really great for piece of mind. Knowing that you have something that can help in the case of an event like losing your job, or something else that prevents you from working, is very easy on the mind.