Everyone wants to have provisions for a good retirement. While not all people dream of sailboats, exotic vacations, and 5-star living for their retirement, most want to be comfortable and financially free. The worries of debt and living paycheck to paycheck still plague many people well into middle age, however. Fortunately, there is a way to retire comfortably without having to work three jobs or sell a successful online startup company.

While there is no easy way to retiring wealthy, applying the principles of discipline, persistence, and financial wisdom will allow you to retire a millionaire while you’re still young enough to enjoy the luxuries you’ve saved for. In fact, if you use your money wisely, you should have enough money not only for your own retirement, but also for the welfare of your family as well. Consider this the ultimate guide to retiring a millionaire and start saving now.

Investing and Time Are the Keys

There is a way to retire a millionaire while making well below a 6-figure annual salary, and the key is compound interest. Compound interest reinvests itself, allowing your money to multiply exponentially in the long run. A few years of investing won’t yield a very impressive return, but 20 to 40 years will. Take, for example, a 35 year-old man who begins investing $200 a month into a retirement account. At a 7% interest rate, when this man is 65, he will have $203,118 while only putting $72,000.

The other key in this equation is time. The man in the previous example has made a great return on investment, but it’s not quite enough to retire on for many years. Using the same example, say a woman invests $200 a month at a 7% interest rate but starts when she is 25. She will end up paying more into the account—a third more, in fact—but her returns will be almost double, with her total savings at age 65 at $402,492. That’s starting to shape up into a great retirement fund with only $200 a month! If she saved a hundred dollars more per month, she would be a millionaire at age 65.

Roth IRAs

One of the best retirement accounts you can get is a Roth IRA, depending on your tax bracket. Roth IRAs enable you to contribute monthly but tax you yearly for you contributions. Those taxes are based on your contribution amount. For instance, if you contribute $8,000 a year into your Roth IRA, you will be taxed based on this amount. The benefit of the Roth IRA is this: you are taxed based on your contributions, but when you take out your total savings at the end of an allotted period of time (usually when you are over 59), you may remove your savings tax-free. So instead of paying taxes on hundreds of thousands or millions, you pay it on $8,000 every year, which ends up being a much smaller amount.

According to the Roth IRA’s website, “Roth IRAs make the most sense if you expect your tax rate to be higher during retirement than your current rate. That makes Roth IRAs ideal savings vehicles for young, lower-income workers who won’t miss the upfront tax deduction and who will benefit from decades of tax-free, compounded growth. Roth IRAs also appeal to anyone who wants to minimize their tax bite in retirement as well as older, wealthier taxpayers who want to leave assets to their heirs tax-free.” This is great news for the majority of lower- and middle-class Americans who don’t have hundreds of thousands of dollars to throw at retirement and don’t want to get taxed heavily.

Traditional IRAs

Traditional IRAs are similar to Roth IRAs, but have fewer restrictions and a different tax system. If you contribute to a traditional IRA, you can deduct that amount from your total income when you pay yearly taxes. Sometimes this is a benefit, if it helps you qualify for tax credits for education or other deductions. While this may be helpful, you have to pay ordinary income tax on all the money you withdraw in retirement. If you make quite a bit of money now, say $200,000 or more, a traditional IRA will benefit you much more than a Roth could (not to mention that the Roth has a salary cap less than that). One huge advantage to the traditional, however, is that you may put money into one at any age under 70. It’s never too early to start saving with a traditional IRA!

Mutual Funds

Mutual funds are similar to IRA accounts but have different goals. If you become an investor in mutual funds, you will have virtually limitless opportunities to invest in different types of funds. IRAs have the goal of saving for retirement, while mutual funds have the goal of making money in general. Mutual funds can be set up for retirement, or they can be a main source of income throughout your life. Some people invest heavily in only a few options, while others invest in index funds which mimic huge systems like the S&P 500 or the Dow Jones Industrial Average. Mutual funds have all different sorts of qualifications and can be either more or less restrictive than IRAs. The choice all comes down to your preferences and doing a little research on your investments.

Making Your Retirement Money Last

No matter what form of investing you chose, you’ll want to consider taking care of a few aspects of your finances to enable your money to last longer. The money you save for retirement may be a fixed number once you stop working, so cutting down on expenses is a great way to make your money last or take on side jobs.

A great way to do this is by paying off your mortgage before retirement. While not everyone is able to do this, if you have the cash flow to do so, you will love not having to make monthly payments out of your retirement money. Another great way to stretch your savings farther is to pursue investments which will give you passive income. For instance, if you invest in real estate and rent out several properties, you could make hundreds or thousands of dollars in passive income in addition to your retirement money (although some people would not consider this retirement).


Retiring a millionaire is really fairly simple with some well-placed earnings, discipline, and time. Compound interest will do the heavy lifting for you if you have the foresight to invest in IRAs and mutual funds. Forget about getting lucky with the right stocks or building a startup empire to sell. All you need is a small portion of your paycheck and patience.