Editor's Note: This story originally appeared on NewRetirement.
A lot of retirement planning articles suggest that you “need” a million bucks to retire securely. We know that is not true. There are as many different ways to retire with confidence as there are people.
However, getting to a million dollars is a big and often desirable milestone. And, depending on your goals, retirement can indeed require sizable savings.
Here are 14 myths and a few hints about becoming a millionaire.
Millionaire Myth: You Need To Be Born Into Money
There is no doubt that it is easier to make money when you currently have, come from or inherit money.
However, it is not a necessity. It is not even all that common. According to Fidelity’s Millionaire Outlook study, the vast majority — 82% — of millionaires are self-made: They did not inherit money; they built their wealth themselves.
TIP: What millionaires did inherit from their parents were values. Thomas Corley, author of “Rich Habits: The Daily Success Habits of Wealthy Individuals,” said that “Over 95% [of millionaires] said they were taught to take responsibility for their actions, respect the law and other people’s property, work hard for what they want, and improve themselves daily.”
Helping your children learn about how to build wealth and sharing your values with them is a powerful legacy.
Millionaire Myth: If You Have a High Salary, You Are Set for Life
You may have read the seemingly pathetic stories of families who make $350,000 a year who say they are just “getting by.” Maybe you rolled your eyes and moved on. Maybe you identify with their saga.
When you are making a lot of money, it is easy to spend a lot of money, and if you are living in certain areas of the country, paying for a private school and have expensive tastes, a really high salary can get spent rather quickly.
Most people find that it is alarmingly easy to spend what you earn — no matter how much that happens to be.
The average millionaire does pull in a decent salary. The median household income for millionaire households is $200,000. However, the trick to becoming a millionaire is not necessarily in how much you earn. It IS all about how much you can save.
TIP: The Fidelity study found that, on average, 31% of millionaires’ salaries go to savings. However, the earlier you sock away money, the easier it will be to get to millionaire status thanks to the magic of compounding returns.
For example, a 20-year-old who saves $200 a month until retirement would have around $1 million at 65 (given historical returns). While a 50-year-old contributing $1,500 a month would have only half that much at 65.
But, no matter your age, saving money is THE PATH to millionaire status.
Millionaire Myth: It Is All Luck
Sure, getting lucky can be an element of how to get rich. After all, success does require taking some degree of risk. As the saying goes, “fortune favors the brave.”
However, the risks taken by millionaires are usually well-calculated. And, becoming a millionaire is not necessarily about how you make your money. It is about putting a significant portion of your earnings toward savings. There is nothing lucky about saving and investing (in sensible, low-cost investments) — doing that is purely smart.
TIP: Here are 22 smart and easy ways to boost your savings.
Millionaire Myth: You Have To Make All of Your Money Before You Retire
Most of us are indeed worried about running out of money in retirement and ask: “Will my savings really last as long as I do?” However, maybe we are all asking the wrong question. Retirement does not necessarily need to be a time of decreasing wealth.
You can actually improve your financial status during your golden years.
TIP: Review these tips for how to become a millionaire AFTER retirement.
Millionaire Myth: You Must Have a Fancy College Degree
Think millionaire, and you might think of a Harvard-educated lawyer or a Stanford MBA. While higher education does increase your chances of a higher salary, it does not improve your chances of becoming a millionaire.
According to the now-classic book, “The Millionaire Next Door” by Thomas Stanley, only 8% of millionaires hold a master’s degree, while 8% have law degrees and 6% went to medical school.
Millionaire Myth: They Work for Big Banks, Law Firms and Tech Companies
Yes, there are a lot of millionaires who made their money working for big companies.
However, according to Stanley, 66% of millionaires own their own businesses. Entrepreneurship appears to be the surest route to millionaire status. And, most millionaires actually have multiple income streams.
TIP: The research conducted by Corley found that millionaires are scrappy hustlers. They often have multiple streams of income, with 65% having at least three different streams.
TIP: Real estate side hustles and investing are popular among millionaires.
Millionaire Myth: Success Comes Easily and Early
Guess the age of most millionaires? You might think they are all in the mold of young techies like Mark Zuckerburg, who started Facebook while still in college.
However, the average age of U.S. millionaires is 62 years old, and about 38% of millionaires are over 65.
And, mid- to late-life success is particularly true for entrepreneurs. According to the Global Entrepreneurship Monitor (GEM), the highest rate of entrepreneurship worldwide has shifted to the 55 to 64 age group.
Furthermore, the Age and High Growth Entrepreneurship study, conducted by MIT in conjunction with the U.S. Census Bureau, analyzed 2.7 million people who started companies between 2007 and 2014 and found that a 50-year-old is twice as likely to have a massive success — defined as a company that performs in the top 0.1% — than a 30-year-old.
TIP: Learn more about entrepreneurship after 50.
Millionaire Myth: They Don’t Have Anything To Worry About
The No. 1 concern for most millionaires is one you probably identify with: health. Being healthy and being able to afford health care is their No. 1 worry.
Other concerns?
- How to spend their time
- How to leave a meaningful legacy (not money, but impact)
- Their future financial security
TIP: Figure out what health care will cost in retirement.
TIP: Have a plan for what you want to do in retirement. Here are a couple of resources:
Millionaire Myth: They’ve Got Their Future All Figured Out
The Fidelity study found that millionaires feel significant unease about their future finances. Across the categories of retirement savings, debt management, the value of real estate, level of income and investment returns, 68% of millionaires felt good about their current situation, but only 17% were confident about their future finances.
TIP: Run worst-case scenarios using the NewRetirement Planner and stress-test your retirement plans to gain confidence that you will have the money you need when you need it.
Millionaire Myth: They All Work With Financial Advisors
Only one-third of millionaires in the Fidelity survey work with a financial advisor. Working with an advisor does not necessarily result in lower stress for the wealthy. What does make a difference? Financial literacy.
Millionaires who felt less stressed are those who consider themselves to be knowledgeable about investing and manage their finances on their own.
TIP: Get control over your own financial future. Use a comprehensive retirement planner to gain an understanding of your own money.
Millionaire Myth: They Are All Financial Whizzes
According to the Spectrem Group, 58% of millionaires admit to having a great deal to learn about investing.
However, they DO save and invest.
TIP: Stock picking and day trading are not the tried and true paths to becoming a millionaire. You can take the simple path and invest in index funds with a long-term buy-and-hold strategy.
TIP: Corley found that “Self-made millionaires make a habit of saving.” You should too.
Millionaire Myth: They All Live in New York City
There are millionaires all across the country, and New York state doesn’t even rank in the top five states for millionaires. The states with the highest percentage of millionaires are New Jersey, Maryland, Connecticut, Massachusetts and Hawaii, according to Phoenix Marketing International.
TIP: Run your own race to wealth. It doesn’t matter where you are or what you do.
Millionaire Myth: They All Drive Fancy Cars
What is the preferred car of millionaires? It isn’t a Tesla. Nor a Mercedes. It isn’t even a Lexus. Guess what? Millionaires drive Fords more than any other single type of car.
TIP: Think carefully before spending on luxury goods. It is okay to splurge, but try to first splurge on savings. If that is covered, then indulge.
Also, consider how to spend money for happiness, not status.
Millionaire Myth: They Live a Life of Leisure
Millionaires are not typically lounging around the pool or hitting the links. Hard work counts, and millionaires often love their work. In fact, even though millionaires are usually older, 80% of them are still on the job.
TIP: Can you reduce expenses while delaying retirement for a year and really bump up your savings?
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