Target Funds and 401K Millionaire

Amassing a million dollar  is nothing more than a matter of committing and sticking to a systematic savings and investment plan. For the first twenty years, the companies I worked offered 401K with 100% matching fund. I put $500 and my employers contributed another $500, totaling $1000 a month.

After 20 years of working, I broke free but still continued savings $1000 a month in IRAs and invested in a 2025 Target Date Fund. A target date fund (TDF) – also known as a lifecycle, dynamic-risk or age-based fund – is a collective investment scheme, often a mutual fund or a collective trust fund, designed to provide a simple investment solution through a portfolio whose asset allocation mix becomes more conservative as the target date (usually retirement) approaches.

A modest savings of $1000/month for 30 years invested in a Target Fund has made me a cool million dollar this year. Target funds generally have low maintenance fees. I pay around $25/month. I will start drawing Social Security in 2023 and a 2025 target fund is perfect for my situation. If you’re young, you may aim for 2060 or 2050 target fund.

Yes, you can become a millionaire without winning a lottery. It is possible to become a millionaire by cutting your small expenses and getting into the habit of saving regularly. It is not only what you make but also what you spend that determines if you would be a millionaire or not when you retire. We all want to make big bucks as quickly as possible and retire early, but that is not always possible unless you win a lottery. However, with a long term saving strategy most people can become a millionaire by the time they retire.

Can you believe that 70% Americans are living from paycheck to paycheck? You may think that those small items, like coffee or candy, that you spend money on everyday are not worth your considerations when it comes to realizing big money in your bank accounts. You will be surprised to know that by cutting $100 every month from your expenses and investing that money for 30 years, you will net close to a quarter million dollars at an average 10% rate of return. If you are an one-pack-a-day smoker, you are just throwing away a quarter million dollars by smoking for 30 years.

Have you ever heard of the “Latte Factor”? It is the money you spend on small items everyday that add up to a considerable chunk at the end of the year. Invested wisely, that money will grow to your wildest imagination. You do not have to give up your favorite coffee and spend your days miserably. Just cut down on your everyday small item purchases by at least 50%.

Start an expense book and, for one month, write down every penny you spend everyday. At the end of the month, add up the money you spent on small items like coffee, candy snacks, muffins, power drinks, power bars, etc. Now, here is what you need to do. Budget your coming month’s small item expenses at half the level you spent in the previous month. At the start of the month, take 50% of the money you plan to spend on small items and stash it in a newly created savings account. Do it for one year and at the end of the year, take the money out from the savings account and buy some index fund using a discount online broker like

Besides savings on small items, you should also have a monthly retirement account, for example a 401K account if your employer is offering one. It will save you big on taxes till you retire and start withdrawing money from it. If your employer is matching your 401K contributions up to a certain percentages, it will be like throwing away money if you are not taking advantage of that match. Put two to three thousands dollars in a Roth IRA because returns from a Roth IRA is tax free.

If you are short on cash, get a newspaper delivery route. It will provide you a nice chunk of money at the end of each month. Start a website on your favorite topic, for example a discussion forum for paper delivery persons. You can generate a small income from advertisements on your website. Research selling opportunities in e-bay to generate small incomes every month.

If you pay your credit card purchases over several months, you are making the credit card company rich. Settle the entire amount of your credit card balance when the payment is due to avoid exorbitant interest rates charged by credit card companies. If you are not able to pay the entire balance at the end of the month, do not purchase on credit. Wait for your purchases till you save enough money. Except your house and cars, avoid all debts.

There are plenty of opportunities to amass wealth and become a millionaire when you retire. Use the Internet to educate yourself in saving, investing, and earning extra money.