According to Fidelity, the number of IRA millionaires on its platform has grown 40% over the past year. However, this figure does not include all retirement account millionaires. Becoming a SEP-IRA millionaire may be easier than becoming a 401(k) millionaire, but you need to have self-employment income to contribute. To become a SEP-IRA millionaire, you need to be eligible to contribute to one, which usually means owning a business, being self-employed, or being an independent contractor.
The first step is to open a SEP-IRA account, which can be a relatively easy process involving some paperwork. If you have a financial planner, they can help you set up the account. The next step is to contribute enough money to your SEP-IRA, with a rough rule of thumb being to save at least 10% of your salary. The tax benefits of contributing to a SEP-IRA can help you make even larger contributions each year. The maximum SEP-IRA contribution for 2023 is $66,000 and $69,000 for 2024.
Investing your SEP-IRA contributions is crucial in reaching millionaire status. Compounding interest can help your money grow faster. It would take around 45 years to become a SEP-IRA millionaire by contributing $22,500 per year and letting it sit there, assuming a 10% return on your investments. However, if you contribute the maximum of $69,000 per year, it would take just under 10 years to become a millionaire. Becoming a SEP-IRA millionaire takes time, with rough calculations showing the monthly contributions needed to reach this milestone in various time frames.
It is essential not to raid your SEP-IRA investments before retirement, as this can significantly reduce your chances of achieving financial freedom. Raiding your investments will also result in taxes and penalties on withdrawals. Following the steps outlined can put you on the path to becoming a real-life retirement account millionaire, but many may need to accumulate even more retirement assets to achieve their desired retirement lifestyle. Working with a financial planner can help determine your financial freedom number and create a plan to reach your retirement goals.
