5 Ways To Become A Millionaire By 50

Who wants to be a millionaire? Sometimes making ends meet feels so overwhelming, and meeting life's expenses looks so daunting, that you might believe you will never become a millionaire. While this may be true for many, it is not true for everyone. And those who have a financial plan to save in a dedicated fashion, can reach this financial milestone earlier than most. These 5 proven methods can put millionaire status within your reach by age 50, even if you have a family.

Start early, and start with Roth. Yes, it's true that many college graduates find themselves burdened by education debt. But when you get that first professional job, you likely become eligible to contribute to a 401(k) plan. In most cases, you are not able to receive a free company match unless you put in your own money. So, here's a simple formula: at age 25, start by contributing just $5,000 per year, and gradually increase it to the annual maximum contribution amount (currently nearly $20,000). If you receive a 5% company match and an 8% average rate of return, by the age of 50 you will have close to $1 million. And those savings are even more valuable if you are contributing to a Roth 401(k) because any funds you withdraw in retirement will be tax-free.

Catch up in your mid 30's. Ok, you were just getting started in your 20's, and maybe you took a pass on investing. But now you are now getting serious. I want to again beat that drum for Roth contributions because it does not matter have much money you have saved, it's what you will have after-tax, and Roth distributions are 100% tax-free in retirement. At age 35, your annual contributions to savings in a Roth 401(k) will need to increase to the max annually, but you'll still get to at least $500,000 by age 50 if we use the same company match and return assumptions.

Own a home. If you buy a $300,000 home in your mid 30's, and receive a 3% annual return on your principal investment, the value of that home will grow to $467,390, yet your mortgage balance will fall to $183,956. That means your total equity (the amount you own) will be $283,434. Housing equity is part of your net worth. Get a higher return from the growth of your real estate and you will get even closer to millionaire status.

Contribute early to a college savings plan. Let's say you have a child at age 38. When that child becomes 18, college costs will potentially be incredibly high, and you will be 56 years old when they enter higher education. So, here's the plan: save $500 per month for 18 years (which can include contributions from family over the years), and you could have nearly $225,000 saved for education by freshman year. Much of those savings will already have accumulated by your age 50 and, once you have college paid for, you can hit the accelerator on retirement saving as you approach your late 50's. Plus, if your child gets scholarship, those savings could be yours (minus Federal income tax and a 10% penalty on the growth of your investment if not used for higher education).

Find alternative ways to make investments. If you have extra funds available for investment, take a small portion and systematically invest in index funds or a brokerage account, contribute to and invest in an HSA to build an account to pay for out-of-pocket medical expenses (and receive a tax deduction on your contribution, in most cases), or consider diversifying into real estate investments or even cryptocurrency. Net worth is the value of all of your investments, minus your mortgage and any other debt you may have, so every additional investment can help.

Becoming a millionaire by age 50 takes a lot of discipline, and a lot of savings. For many, it's a bridge too far. For some, getting there will take substantial sacrifices. $1 million is just a number, and what is most important is what you really have after-tax. That is why I love savings in Roth retirement accounts. The downside to fixating on the million dollar goal is that you may pass up opportunities to enjoy experiences along the way. Financial planning can help you find the right savings goal for you at any age, and getting a plan together increases the likelihood you will reach the goals you set.