Saving for retirement: How I put away $1 million

Save more than $1 million for retirement? Are you kidding? That goal seems so daunting.

Only 46 percent of workers have even tried to calculate how much money they will need to retire comfortably, according to the 2013 Employee Benefit Research Institute Retirement Confidence Survey. "Most people aren't saving, and they aren't saving enough," says Ruth Helman, co-author of the EBIR survey.

A strong stock market in the past two years has helped retirement accounts, but most investors have a long way to go to reach the $1 million mark. The average 401(k) account balance is $255,000 for participants age 55 and older who have been with their current employer for 10 years, according to Fidelity Investments, one of the largest retirement plan administrators.

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The National Retirement Risk Index, put out by the Center for Retirement Research, finds that 53 percent of U.S. households are at risk of not having enough savings to maintain their living standards in retirement. "You have to make a choice," says Anthony Webb, a senior economist at the Center for Retirement Research. "Work a lot, lot longer or save a lot, lot more."

But reaching $1 million is not impossible, even for ordinary investors. LearnVest spoke to three everyday millionaires who grew their nest eggs through thrift and investment savvy. We asked them how they did it and what advice they would give to investors looking to follow in their footsteps.

Laurie Itkin, 44, La Jolla, Calif.

How much she's saved: $1.1 million in a 401(k) plan, traditional and Roth IRAs, and a brokerage account

How she did it: I lived below my means; that's the number-one reason I've been successful.

I created a $1 million portfolio by the time I was 40. I started investing in the stock market in 1993 when I was 24 years old, with $1,600 my grandmother left me. You have to learn by doing with investing. I started reading The Wall Street Journal every day, like my grandfather.

I always maxed out my 401(k). I put 60 percent into emerging markets and 40 percent into growth stocks, meaning stocks that have more volatility than the S&P 500. It was higher risk but offered potentially more returns. I didn't spend one penny of my bonus, sending it straight to my retirement accounts.

As my wealth increased I still lived in a modest apartment. In my mid-30s, I lived like a college student and I was proud of it. When I was dating my husband, Dan, he couldn't believe I had my television on a used table I had bought for $10.

I also made a few decisions contrary to most people. I did not buy real estate when I could afford to, even though I had a $100,000 salary by the time I was 30, working as a telecom lobbyist in Washington, D.C.

The only debt I had was student loan debt that I paid back, and then no debt at all until I bought a house at 35 with my husband.

Now I live in a community in San Diego where people are overextended, with cars and houses they can't afford. My husband and I live in a 2,000-square-foot condo.

Her advice: I don't care what you have; it's never too late to save and invest. So many people are losing money in their checking accounts because they're afraid to take risks, and money market accounts are paying less than the rate of inflation. You have to take risks in order to get rewards.

You also have to follow some tough rules. I knew from a young age to separate my wants from my needs. My thought process was this: Do I really want a new purse — or would I rather spend that money on some need I may have in the future? My biggest challenge was watching my friends buy beautiful things while I sacrificed for the future.

Dominic Fleming, 61, Baltimore, Md.

How much he's saved: $2.3 million in an IRA and brokerage accounts

How he did it: I hit my first million slightly before I was 50. My nephews call me "rich Uncle Dom," because I like to slip $100 bills in birthday and Christmas cards. They say I'm rich because I was a lawyer, but that's not how I made my money. I worked for the public defender's office in Baltimore, representing poor and middle-class clients. I made my money by saving and investing.

Consciously, I started saving when I was 18, but one of the biggest lessons I learned was in kindergarten, when the savings and loan allowed us to open accounts with $5. I put in a few nickels and dimes, and never paid much attention. But when I was 18, it took the bank 30 minutes to update the interest. My money had grown over time — without me doing anything — to $1,000.

I bought my first stock, Baltimore Gas & Electric, almost as a joke. Every time I walked out of a room with the lights on, my father would say, "We don't have stock in the electric company." Now I did. The stock paid dividends, which I thought was a good thing, until I realized you're taxed on those dividends. So I started looking at growth stocks, and at small-company stocks that most people hadn't looked at.

I used to go to the investing section of the library to read books. I liked Peter Lynch's book, One Up on Wall Street: How to Use What You Already Know to Make Money in the Market. He validated what I was thinking about smaller companies because he advocated investing in what you know. Now investment research is easier; everything is online.

His advice: When it comes to stocks, I'm not a big trader; I'm a buy-and-holder. I always looked at bad times as good times to buy stocks. I set up discount brokerage accounts to save on trading costs.

I kept the same lifestyle when I earned more money. When I found a neighborhood I wanted to live in, I'd buy the cheapest house. My rule was I didn't want to spend more than three times my gross income on my home. I also always saved for a new car instead of financing it.

Neil McCarthy, 73, Roswell, Ga.

How much he's saved: $2.1 million in retirement accounts plus an annuity and a pension

How he did it: I maximized my retirement accounts at my employers, and I invested money on my own. I worked at Union Carbine for 20 years as a research chemist and received a pension.

I started investing in stocks when I was 30. A stock broker came to the office to prospect for clients. After meeting the broker, I ended up talking to a co-worker about what stocks I should buy.

From there, I became interested in investing and did a lot of research on stocks. I often bought closed-end funds (mutual funds that you can buy on a stock exchange) that I thought were selling at a discount to their underlying value.

My wife, Maureen, worked as a first-grade teacher until my two sons, now 42 and 43, graduated college. The income helped pay for their college education.

After 20 years at Union Carbine, I moved from the New York City area to the Atlanta area to work as a financial analyst for BP Amoco in 1990. I invested my 401(k) plan in low-cost index funds. I benefited from the bull market of the 1990s, but I kept my money in the market in good times and bad.

I retired from BP Amoco in 2000 and starting managing my own money. I became a certified financial planner. Now I offer advice to people on how they should manage their money in retirement.

His advice: Save the maximum in your retirement plans and make it automatic. If you have to take that money out of your paycheck, you're never going to save enough. Basically, pay yourself first.

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