Start young
Courtesy: Chis and Laurie DonahueName: Chis and Laurie DonahueAge: 55
City: Naperville, Ill.
Saved: More than $2 million (together)
After decades of saving, Chris and Laurie Donahue have both accumulated million-dollar nest eggs.
Each started saving as soon as they began collecting a regular paycheck in their 20s."We've been at this for 33 years and have never stopped investing, even when the markets go crazy," he said.
Donahue, who works in the tech industry, said he was putting away more than 10% of his earnings when he was earning around $22,500 a year in 1981. Now, he earns six-figures, making it much easier to set aside that kind of money.
This year, both will make the maximum allowed 401(k) contribution (for their age) of $23,000, which represents between 11% and 15% of their salaries.
"It's hidden money," he said. "It may not show up in your check every month. But you'll need it eventually."
Watch out for fees
Courtesy: Raymond IngramName: Raymond IngramAge: 49
City: Atlanta, Ga.
Saved: More than $1.5 million
With more than $1.5 million in retirement savings, Raymond Ingram knows how quickly fees can add up.
In order to keep his costs down, he sticks to index funds, which charge fees of less than .05%.
As he has for more than a decade, Ingram will make his maximum allowed 401(k) contribution this year. At $17,500, that represents nearly 20% of his $96,000 base salary, though he also earns commissions. On that amount, he will pay less than $10 in fees, compared to the $175 he would have paid if he invested in funds that charged a 1% fee.
"I am very very sensitive to what the expense ratios are," he said. "Literally, that's the first screen I look at. It's not just performance, but what are the fees?"
Max out contributions
Courtesy: Ed KatzName: Ed KatzAge: 64
City: Mesa, Ariz.
Saved: More than $1.5 million
Ed Katz has maxed out his annual 401(k) contributions for nearly three decades.
While Katz, a software engineer, has had a six-figure salary since the late 1990s, he first started making the maximum contributions at the age of 35 when the federally allowed limit represented "well over" 15% of his salary.
"[I] said, 'Why wouldn't I do this? You just learn to live on less," said Katz. "I would do more if the government would let me."
He, too, sticks index funds, the majority of which are in equities.
Live frugally
Courtesy: Ilene DavisName: Ilene DavisAge: 63
City: Cocoa, Fl.
Saved: more than $2 million
Ilene Davis walked away from a divorce at the age of 37 with roughly $100,000 in financial assets. Less than 30 years later, she has built up more than $2 million in retirement savings while earning an average annual salary of less than $100,000.
A financial adviser, Davis says she's made it happen by following the same advice she gives many of her clients: to "pay herself first" through retirement contributions each month.
Last year, for example, Davis socked away $37,000 in retirement savings accounts, nearly half of her $80,000 income.
In addition to having an affordable $500 mortgage payment for much of her career, Davis says she cut other costs by buying nearly all of her clothes at thrift stores, driving used cars, cooking most of her meals and staying in affordable motels on vacations.
"It's not a matter of doing without. It's tradeoffs," she said. "It's looking at each dollar you spend and asking, 'Is this the best use of your money?'"
Automate your savings
Courtesy: Claudio BarbosaName: Claudio BarbosaAge: 50
City: New York, N.Y.
Saved: $1.1 million
Claudio Barbosa hit his goal of saving more than $1 million in January.
The savings success was particularly rewarding given the fact that when he moved to the United States from the Philippines in 1986, he had no savings.
His secret: automating his savings routine.
Early in his career, he contributed 10% of his salary to the company 401(k) plan. When he started making around $60,000 a year in the mid 90s, he upped his contribution to the maximum.
Now, earning about $175,000 a year through one full-time and three part-time accounting jobs, Barbosa will contribute the federal maximum to his 401(k) this year. On top of that, he has around $2,500 automatically deducted from his bank account each month to go into an Individual Retirement Account and other investment accounts.
"The trick is that you condition yourself: I'm only getting paid (X dollars) a month, and you have to live with this," he said.
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