Getting started is one of the toughest parts of investing. You have to figure out how to free up money to sock away, get a process in place to actually put your money to work, and learn to handle the ups and downs in the market.
Once you have a good foundation in place, though, investing becomes much more straightforward. Not only are you more prepared as an investor, but your money can also start doing some of the heavy lifting on your behalf, thanks to the long-term benefits of compounding.
To help motivate you to get that foundation in place, here are four ways to grow $100,000 into $1 million for your retirement savings.
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No. 1: Simply let compounding work its magic
Over the long haul, the stock market has provided average annual total returns somewhere in the neighborhood of 10%. If the future ends up like the past, $100,000 would grow into $1 million in just over 24 years from compounding alone.
The good news is that if you get that $100,000 nest egg saved by the time you're 40, you have a decent shot of retiring a millionaire at a fairly standard retirement age simply from compounding. The bad news is that those market returns are not guaranteed. If you're relying entirely on compounding to get you from $100,000 to $1 million, you may very well have to wait much longer.
No. 2: Keep on investing
Of course, if you were able to save and invest enough to build that initial $100,000 nest egg, you likely have a great foundation in place to keep investing. The table below shows how many years it will take to go from $100,000 to $1 million based on the amount you can sock away each month and the rate of return you earn along the way.
|
Monthly Investment |
10% Annual Returns |
8% Annual Returns |
6% Annual Returns |
4% Annual Returns |
|---|---|---|---|---|
|
$2,000 |
13.0 |
14.8 |
17.2 |
20.7 |
|
$1,500 |
14.4 |
16.6 |
19.7 |
24.3 |
|
$1,000 |
16.3 |
19.1 |
23.2 |
29.5 |
|
$500 |
19.0 |
22.8 |
28.5 |
38.2 |
|
$250 |
20.8 |
25.3 |
32.5 |
45.5 |
|
$100 |
22.1 |
27.3 |
35.8 |
51.8 |
Table by author.
Every little bit helps. Keeping up your investments over time can go a long way toward improving the odds of reaching millionaire status by the time you retire.
No. 3: Enlist Uncle Sam's help
In 2024, people under age 50 can generally contribute up to $23,000 to their 401(k) plan through work. For those aged 50 or up, the limit rises to $30,500. A 401(k)-style plan offers automatic investments directly from your paycheck, tax advantages, and the possibility of an employer match.
If you invest in a traditional-style 401(k), your contribution comes from your paycheck pre-tax. If you are in the 24% tax bracket, a $1,000 contribution to such a plan would only reduce your take-home pay by around $760. That makes it a much easier target to reach.
No. 4: Get your boss to pitch in, too
Likewise, while matches vary by employer, a typical match level is $0.50 for every $1.00 the employee contributes, with a cap based on the employee's salary. If you get that kind of match, the same $1,000 contribution could end up actually putting $1,500 in your account.
Combine that type of employer match with the tax deduction from contributing to a traditional style 401(k), and that adds up to $1,500 of investments for only $760 out-of-pocket cost to you. That extra help can go a long way toward getting you to that millionaire status by retirement age.
Get started now
Whether you've already got that $100,000 foundation built or you're still working on it, the path to a $1 million retirement nest egg is one that will take years to make a reality. The sooner you get started, the sooner that timer will begin working in your favor.
So, make today the day you put your plan in place. If you reach that $1 million target by the time you retire, you'll certainly be glad you did.
