How to Retire With at Least $1 Million

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Editor's Note: This story originally appeared on SmartAsset.com.

Saving for retirement is an important part of financial planning for most Americans. With pensions no longer in widespread use and Social Security simply not enough to cover retiree expenses, it’s up to individuals to put aside money for their later years.

But if you do it right, relaxation and recreation will become more important than work and earning ever was.

How much you’ll need to save for retirement depends on where you live and what lifestyle you expect to live. But saving $1 million is a goal many set for themselves, and there are a number of steps you can follow to get yourself there.

Start Saving Early

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For young workers, especially those straight out of college or working their first “real jobs,” retirement can seem a very long way off. After all, you’ve got at least another 40 years or so of working before it will be time to think about which beach you’re planning on parking yourself on.

Even though retirement may seem like a distant dream, it’s still important to start saving for it as soon as it’s financially possible.

That’s because compound interest is the key here. When you save for retirement, you invest the money, oftentimes in mutual funds, stocks, bonds or ETFs that track a market index. Ideally, the shares you purchase in various companies grow in value over time.

Investing early gives your money more time to grow. In fact, some studies show if a worker saves for retirement from ages 22-32 and then stops, they’ll end up with more money than someone who saves from 32 until retirement, if salary and contribution totals are held steady.

Long story short: If you want to end up with $1 million in retirement savings by the time you’re ready to bring your career to an end, it’s important to start saving from the get-go. If you want help increasing your retirement savings, consider working with a financial adviser.

Maintain a Strong Asset Allocation

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Even if you start saving for retirement from the first day you get a job, if you don’t make smart investments, there’s no way you’ll be able to end up a millionaire at retirement.

However, ensuring your portfolio has an appropriate asset allocation is one of the most important moves you can make. Luckily, there is a general formula you can follow to give yourself the best chance at having the funds you want when you retire.

Generally speaking, early in your career, you should be very aggressive with your asset allocation strategy. This means orienting your investments to stocks and other equities.

While these investments are on the riskier side, they have the capacity to result in major returns. That’s because early in your life, you can afford to take these risks with the idea that you’ll see ample growth.

As you get older and near retirement, your asset allocation should start to taper towards a more conservative balance. This means less money should go into stocks, with more being funneled to bonds, ETFs and other lower-risk investments. As you can imagine, when you’re closer to retirement, you need to be more careful about risk. That’s because if something goes sideways, you won’t have time to earn that money back.

While these are the basics of asset allocation, planning can be complex. For help developing a strategy, strongly consider working with a financial adviser.

Make and Stick to a Budget

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One of the simplest ways to ensure you have $1 million – or whatever your goal is – when you’re ready for retirement doesn’t require any financial know-how or investment vehicles. All it takes is understanding the most simple of financial concepts: You can’t save money you spend.

The first step you can take to get your retirement savings going is to make sure you’re taking advantage of your 401(k) or other workplace retirement plan, if you have access to one.

This means your money goes into retirement savings before it even gets to your bank account, so you never have a chance to spend it. A successful retirement savings plan, though, will likely involve more than just a 401(k). You’ll need to put money aside each month from your account as well.

The best way to do this is to make a budget that includes saving for the future. Unless there’s an emergency, like a medical issue or a major car repair, this money goes into a savings or investment account.

Making smart decisions with your spending will allow you to boost your savings now. In other words, avoid buying the most expensive cars, and try to pick sensible vacation spots that aren’t overly pricey.

Bottom Line

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Going into your retirement years with $1 million in savings is a tall order, but it certainly isn’t impossible.

You need to make sure you’re saving early, with a smart asset allocation, and that you aren’t spending so much that you don’t have money to put aside for the future. Following these tips won’t guarantee you anything, but it will put you on the path towards a secure retirement.

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