Building a million-dollar retirement fund is a lofty goal, but it is attainable -- as long as you have the right strategy.
There's no one-size-fits-all approach to investing, and there are several ways to turn $100,000 into $1 million or more. The right strategy for you will depend on your timeline and the amount you can afford to invest each month, but there are three simple ways to grow a million-dollar nest egg.
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1. Let your money sit for 25 years
This method is the simplest, as it doesn't require you to invest any additional cash each month. If you're starting with $100,000 and you simply let your money sit in your account, compound earnings will eventually help you reach $1 million or more.
Exactly how long it will take to reach your goal depends on the returns you're earning on your investments. If you're earning a 10% average annual rate of return (which is the stock market's historical average), it will take approximately 25 years to go from $100,000 to $1 million.
But if you're earning slightly lower returns, it will take longer. For example, if you're earning an 8% average annual return, you'll need to wait around 30 years to reach $1 million.
2. Invest $400 per month for 20 years
Investing consistently each month can help your money grow faster, so if you're in a hurry to save more for retirement, this approach will make it easier to reach your goals.
If you're earning a 10% average annual return and investing $400 per month, you'd be able to go from $100,000 to $1 million in savings in just over 20 years.
Again, if your actual average returns are higher or lower than 10% per year, that will affect your timeline. But in general, by making additional contributions each month, you'll earn more over time -- and it will take fewer years to reach $1 million.
3. Invest $1,000 per month for 17 years
The more you're able to invest each month, the faster your money will grow. By investing $1,000 per month with a 10% average annual return, you can reach $1 million in roughly 17 years.
When it comes to compound earnings, time is your most valuable asset. Investing more each month will help your savings compound quicker, but the more time you have to let your money grow, the less effort it will take to see significant earnings.
If you're able to invest a little each month and let your money grow for decades, it will make a massive difference in your savings. For example, if you were to invest $1,000 per month for 25 years while earning a 10% average annual return, you'd end up with around $2.3 million.
The simple way to maximize your savings
There's not necessarily a right or wrong way to save for retirement, so the strategy you choose will depend on your unique situation.
If you have limited time to save, investing as much as you can afford each month is key. But if you get started early and have several decades to let your money grow, time can do most of the hard work for you. And if you're fortunate enough to have time on your side and the ability to invest a little each month, that can increase your savings exponentially.
Saving for retirement isn't easy, but investing in the stock market can make your goals more attainable. By assessing your timeline and financial situation, it will be easier to build a million-dollar portfolio.
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