Did you know that more than half of Americans nearing retirement age have less than $10,000 saved and haven’t done any retirement planning. However, there are still plenty of ways to retire comfortably without a million-dollar nest egg.
In fact, we’re about to show you how you can retire in 10 years, starting right now. Follow the steps and processes we’re about to display, and you’ll be on your way to a fruitful and comfortable retirement.
Remember, there’s a lot of work to do, and this will not be a walk in the park, but if you commit to it and follow through with this plan, there’s a high chance to succeed.
5 Biggest Hurdles Towards Creating Retirement Savings
Before we jump into the step-by-step guide for your 10-year journey, we need to first identify the five biggest hurdles that are preventing you from saving money and simply welcome the retirement age with joy instead of dread.
If you’re reading this article, you’re still young (or young enough), and 10 years is a long time for you to change your life around and go into early retirement. After the words of encouragement, let’s get to the five biggest obstacles:
- You’re spending too much money
- Understand finance
- Learn about financial history
- It’s you against you
- Watch out for people taking advantage of you
You’re Spending Too Much Money
One of the biggest problems people have nowadays is that we’re living in a consumer society. Not only do we need to pay living expenses, which can be quite high, but we are also doing everything to showcase our status.
This means having the latest iPhone, rocking the new car, going to a fancy resort, having restaurant meals, choosing expensive cable plans—you name it. Now, we’re not saying that you should adopt a Spartan way of living and give up everything, but we’re asking you what matters: having money or making a perception of having money!
Most people spend way too much, and no matter how much they earn, they are still living on the edge of their capabilities. While you can always go bigger and do better, this is what’s been preventing you from saving money first (and later investing it).
Unnecessary spending is the first obstacle on the way, but even if you know how to save some of the pre-retirement income, there’s still a long journey towards early retirement.
Understand Finance
Creating savings isn’t difficult, and this is something you can do with no specific knowledge or understanding of the economy. However, remember that you want to create savings for retirement in the next 10 years, and putting money aside will not do it.
You’ll need to learn about finances in general and how personal finance works. Once you start to take action, you’ll need the basic understanding of markets, insurances, financial terms, etc. You don’t need to get an MBA or read dull economic textbooks, but there are ways and sources that are suitable for what you want to achieve.
Learn About Financial History
Although this seems like the previous point, it is completely different. Having a financial advisor may help you come up with sound investments, but they will not teach you the landscape of the market, the history of investing, or how different markets work.
You’ll need to do this by yourself. Once you start learning about the financial history, you’ll start noticing patterns. The last few years are a great example of what we aim at. It’s something we haven’t seen, yet we’ve been able to draw parallels with previous financial crises and see some similarities in what has been going on in different markets.
Not understanding this will make it so much harder for you to generate substantial retirement savings.
It’s You Against You
Everything we do at Wealth Nation revolves around this point. It all comes down to you, your mindset, and your discipline. We are not designed to think about long-term financial risks, gains and take action that may be visible in a few years. Yet, the people who maintain discipline do see the results.
There’s a lot that can happen for you to give away your opportunity to reach retirement age early and with a large amount of money in your bank account. Coming up with and sticking with long-term strategies is hard.
Unfortunately, there’s no secret formula. You need to work towards your goal, stick with it, and do everything you can without making excuses. The goal is to retire in 10 years, and the benefits are obvious, but at the end of the day, it’s only a small percentage of people who stop working early.
In fact, the survey found that 22% of Americans work part-time after they retire! Ideally, this is something you want to avoid.
Watch Out for People Taking Advantage of You
The last obstacle on your way to creating savings for retirement is other people taking advantage of you and your situation. Assuming you nail all of the other things – you understand finances, you are debt-free, you’ve been saving and investing, and you’re on your way to a safe retirement— you still need to watch out.
These can be people from your environment, such as your friends and family, wanting a piece of your business, for you to invest on their behalf, or to claim your assets or stocks. More commonly, these are faux and self-proclaimed experts, shady financial advisors, or people who’ve come up with systems that simply don’t work. They promise you a quick and easy way to boost your retirement savings.
It’s just something you need to watch out for, and this is where education comes in handy. Once you know some basics about spending money, earnings, markets, credit card balances, or taxable accounts, it’ll be hard for you not to notice the gaps in what they promise to deliver.
Listing these five things is easy enough, but each of them takes time to figure out in life. Working on it consistently will definitely take you a step closer to retiring with the substantial amounts you need to live comfortably.
Start Your 10-Year Journey: Step-by-Step
To get things straight, 10 years is a long period. With things changing quickly, nobody can estimate what the world will look like a decade from now. However, that should not prevent us from taking action now and working on our first steps.
Starting at an early age does give you quite a few benefits and room to make adjustments as you’re heading towards retirement. Focus on what you can do and change, and take it one step at a time.
Year 1: Track Your Living Expenses and Pay Off Debt
Day 1:
Every start is complex, and starting retirement planning is not exceptional. You need to commit to this plan and make changes when necessary. Some unexpected situation will appear, your motivation will drop after some time, or your family won’t be as supportive as you would like.
You are responsible for your future. Take the first day to set the tone for your financial journey. It won’t be easy, but always remember that you have the power to achieve your goals and that everything you do now will be worthy in the future. Consider writing that as a reminder when things get tough.
Also, most people start strong on their first day. They create a plan, outline the potential shortfalls, start tracking their daily expenses, and learn about finances in their spare time. This is a safe way to fail, especially if you’ve never done it. Changing habits is hard, and you need to take minimal steps to ensure you succeed each day.
Months 1-3
The crucial assignment for this stage is to cut down on your expenses and other fees as much as possible. Any way that you can think of to reduce your spending can powerfully accelerate your retirement savings.
How would you do that? That depends on your lifestyle. But think about it as preparing your own food at home for your friends and family instead of dining out. If your job doesn’t require an expensive cell phone plan, cut it down.
Maybe you are spending too much money on a gym membership even though you have a cheaper gym in your neighborhood that also suits your needs. Don’t be afraid to consider drastic moves; downsizing your home, switching to public transportation, or going to thrift stores can make an enormous difference in your budget.
Living below your means is a great start. Write down your take-home pay and your expenses, and try not to get over it. Saving a few hundred bucks each week is a great start, and you’re already on the right track.
| Important Tip: Get rid of debt first. You will not be able to save if you need to spend money on your debt, which just accumulates over time. |
Month 4
Establish a tracking system that works for you. Many people get stuck even after cutting down their expenses because they don’t track how much and what they are spending.
The systematization of your monthly budget, spending, debts, account balances, or anything related to your money will help you spot problems quickly and work efficiently towards creating your retirement savings.
A pen and notebook will do the work, or you might want to try an app for your mobile or make an Excel table for that—whatever is convenient for you.
It is important to keep everything organized in one place. When you start tracking, you’ll be able to make adjustments and create different versions of your retirement plans.
Months 5-12
Once you have a budget, you can set aside money for retirement funds and start creating a nest egg. A good rule of thumb is to save 10% of your pre-retirement income. So, if you make $3,000 per month, you would save $300 per month for retirement.
If saving 10% of your income is not possible now, don’t worry. Start with what you can afford and increase your savings rate as your finances allow. The important thing is to get started!
In addition to saving money, you should also begin paying down any loans you have.
We’ve mentioned debt before, and it is important to pay it off before you start saving. However, not every debt is small, and it might take some time for you to complete it. There’s nothing to worry about.
If you have high-interest debt, it can quickly eat away at your savings, like credit card debt. So, it’s crucial to get rid of this loan as soon as possible.
If you can’t afford to pay off your debt and save for retirement at the same time, prioritize paying off your debt. Exploring the job market and getting a side gig might help you achieve that, and once your debt is gone, you can put all of your focus on increasing your monthly income and creating retirement savings.
At the end of the first year, you should have things set up for the future.
Year 2: Increase Pre Retirement Income
In the second year of your 10 years away from retirement, you should continue to do what you did in the first year. Keep saving 10% of your income and paying down any debt you still have. If you don’t have any debt left, you can focus more on saving your pre-tax income, and this is where the real journey begins.
In the first year, you picked up the loose ends and prepared for what was to come.
If you haven’t already, now is also an excellent time to start investing for retirement. There are a couple of different ways to do this. Now, which option you choose depends on whether you have a business to your name, assets, what your job and monthly income are, your age, and your retirement plan.
We’ve explored some common options that you can consider at this point, and by the time you get there, you’ll know what to do.
And here, you need to forget about what most people would do. Consider your spending habits and how you can increase your annual income and personal capital. For example, a couple with two kids will not take the same approach as a couple with no kids.
Here are the most common options we have prepared for you:
401(k) and 403(b)
Suppose your employer offers retirement accounts, like a 401(k) or 403(b), and you start contributing to them. Many employers provide matching contributions, which means they will match a certain percentage of your contributions.
For example, if your employer offers a 50% match on 401(k) contributions up to 6% of your salary, they will contribute 50 cents for every dollar you contribute, up to 6% of your salary.
This is a great way to save for early retirement. There’s not much thought you need to put into the process, and you have a chance to earn some extra cash along the way. But what are some other options?
Traditional and Roth IRA
If your employer does not offer a retirement savings plan or you want to supplement the one they offer, you can open an individual retirement account (IRA). There are two main types of IRAs: traditional and Roth.
With a traditional IRA, you contribute pre-tax dollars, which means your contributions are tax-deductible. The money then grows tax-deferred, meaning you won’t pay taxes on the growth until you withdraw it in retirement.
You contribute after-tax dollars to a Roth IRA, which means your contributions are not tax-deductible. But the money grows tax-free, which means you won’t pay taxes on the growth when you withdraw it in retirement.
Both the traditional and Roth IRAs have their own set of rules and regulations. So, it’s essential to do your research before opening an account. Once you’ve decided which type of IRA is right for you, open an account with a reputable investment firm and regularly contribute to it.
Side note: Check out if you qualify for Social Security benefits. For most workers, Social Security is an additional source of income besides savings. Monthly income will depend on your career earnings, length of work history, and the age at which benefits are taken.
The Social Security Administration has an online tool where you can estimate how much money you will have each month if you qualify. Meanwhile, the Social Security Administration website is well organized, and you can plan your retirement and see whether you are eligible.
If you are over 50 years old, you can also take advantage of catch-up contributions. Annual catch-up contributions of up to $7,500 in 2023 ($6,500 in 2021–2020; $6,000 in 2015–2019) may be permitted by these plans: 401(k) (other than a SIMPLE 401(k))
Keep in mind that you don’t want your social security benefits to be your only retirement asset because you limit yourself to smaller amounts. However, social security can definitely be beneficial, and it is something you can use to help you out.
Other Investment Accounts
Don’t be afraid to start investing in non-retirement accounts because it is the best way to make more income. A standard brokerage account is usually an option for people to start investing because it provides access to a broad range of investments, including mutual funds, stocks, ETFs, and more.
Depending on your annual income, goals, and the timeframe you want to achieve those goals, consulting financial advisors can improve your knowledge about managing money and your risk tolerance.
Year 3: Continue to Learn
After the first two years, you should be caught up with the basics, but there is still much to learn.
Besides doing the same thing you did during the first two years, in your spare time, you should still learn and seek information because you can always find new ways to save, invest, and take more money home. We have plenty of ways to keep learning: money-related books, podcasts, and blogs.
If you do things correctly, in your third year, you should save most of your pre-retirement income and see some excess that you can invest further. With each passing year, think about achieving a high savings rate. The higher the rate, the better, because you will be able to accumulate more cash.
No matter what you’ve chosen in year two as your retirement plan, also think about buying health insurance as you get older.
Although health insurance is paid based on your health, age, and income, it is an investment rather than an expense. Once you retire, your health insurance can help you cover medical costs and reduce the amount of money you spend on medication.
Year 4: Control Your Spending
After saving money and improving their income, many people give in, so they start spending too much and become broke again.
It’s important to keep tracking and reviewing your spending, never to go back to the situation of no savings. Also, always keep in mind that finding new ways to make extra cash is as essential as having your spending under control. Many people find a part-time job or start a side hustle.
This is also a great year to revise your plan if you haven’t already. Predicting a 10-year period is difficult, and you want to make adjustments based on what’s going on in your life but also in the market. This will allow you to be effective in what you do and get the most out of your plan.
Don’t be surprised if, by the time you reach year five, you have a completely different plan than you started with. Perhaps some opportunities opened up, or you hired a financial advisor to work on your personal finance. You may have closed your taxable accounts and increased your savings. At this point, you probably spend money on investments rather than buying a new TV for your home. Your partner may stop working, which requires a whole new idea, etc.
Years 5 Through 10: Stay the Course
Compare the financial journey to losing weight; they both require commitment and discipline, and both can collapse if you break the routine. If you have followed this retirement plan for five years, you have most likely developed your system, and you are on a good path to financial security.
Having good financial habits and knowledge is for a lifetime, not just for achieving some financial goals. Even when you accomplish your retirement plans, there is no reason to stop working after retiring.
Invest, spend money on assets and stocks, and look for different ways to increase your savings. Be creative with the money you’ve got and fund different passive income streams.
What Number Should Appear on Your Retirement Accounts?
It’s hard to tell the precise amount you’ll need for a comfortable retirement because it depends on your living expenses and retirement income.
Many people follow the ”4% rule”. The rule of thumb suggests you expect your investments to earn roughly 4% per year. You will be able to withdraw 4% of your account per year. If that is the case, you need to have savings for one year’s worth of expenses equal to 4% of your retirement portfolio.
Remember to always calculate health care expenses that may be higher later in life, the vast compounded effect of investment return and inflation over a long period, and any high costs for the future (such as buying a new car). Your golden years will be much more peaceful if you cover all the possible situations in the future.
Use This Plan in the Most Efficient Way
This retirement plan is acceptable for the basic idea of saving and investing in your retirement accounts, but there are many ways you can apply it.
The good thing is that you don’t have to be a certified financial planner or specialized financial advisor to follow this plan. But the enormous disadvantage of this plan is that it can’t lead you to financial independence and freedom. You might still need some sort of income after you retire, despite having savings.
We will introduce you to the cash-value life insurance that we think is most suitable for this plan. Not only does it provide you with a savings account, but it also allows you to take out loans and consider investments. Due to the countless possibilities of this approach, you will be able not just to retire but to build wealth, achieve financial independence, and enjoy benefits throughout your life.
If it sounds dreamlike, keep reading to see how it is achievable!
Retire in 10 Years Comfortably With Lifestyle Banking
Lifestyle banking, cash-value life insurance, or overfunded life insurance is, without competition, the best way to achieve financial freedom and retire in 10 years, even with no savings at the moment.
Cash-value life insurance can be used as a retirement plan that allows you to use your life insurance policy like your own personal bank. You can make deposits into your policy and then take loans out against those deposits when you need them.
This concept provides many benefits, including tax-free growth of your money and the flexibility to access your cash when you need it.
To get started with lifestyle banking, you will need to purchase a whole life insurance policy. This type of policy has two main components: the death benefit and the cash value account. The death benefit is the amount of money your beneficiaries will receive if they file a claim on your policy after you die.
The cash value account is like a savings account that grows over time and that you can access through loans.
One of the main advantages of cash-value life insurance is that your money grows tax-deferred. This means that you will not have to pay taxes on the growth of your cash-value account as long as the money remains in the policy.
Another advantage is that you can take out loans against your policy’s cash value without having to pay any taxes on the loan amount. The interest rate on these loans is typically lower than the interest rates charged by banks and other lending institutions.
One of the best things about lifestyle banking is that it gives you complete control over your personal finance. You decide how much money you want to contribute to your policy each year, and you also choose when and how to use the money in your cash-value account.
This type of policy is not subject to the ups and downs of the stock market, so you can rest assured that your money will be there when you need it.
One of the main reasons we think this investment strategy is for almost everyone is because you can follow it regardless of your situation and goals. With lifestyle banking, you can retire in 10 years, whether you are over 50 years old and have no savings for retirement or you started saving in your 20s and want any retirement.
If your current goal is to gain wealth, you can use overfunded life insurance as an investment vehicle that doesn’t require risk tolerance.
Can You Retire in 10 Years With No Savings?
We’ve covered a lot of things in this article, so let’s quickly remind you of what we discussed earlier:
- 5 biggest obstacles for retirement
- 10-year plan analyzed per year
- Lifestyle banking and cash-value insurance as the most effective method
To answer your questions, is it possible to retire in 10 years without having any savings at the moment? The answer to that is yes!
How do I do so?
The path is different for every individual based not only on their current personal finance status but also on their desires and goals. Working through our 10-year plan and overcoming the hurdles we mentioned earlier will get you a step closer to your ultimate goal.
Be disciplined, follow through, and adjust the plan when necessary. Mindset plays a big role in the entire process, and this is something we cannot stress enough.
Participate in Wealth Nation Savings Challenge and Save $500
There’s a long way to go before your retirement, but you can start with your first savings with us! Sign up for our challenge and save $500 that will be used for your emergencies.
The challenge provides you with much more than just $500. You’ll be learning about lifestyle banking systems and different strategies on how to save money, not only for your retirement but for other things as well. Even after you complete the challenge, you will be able to use these strategies to improve your financial situation.