Got $10,000? Here's How You Can Turn It Into $729,000

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The median retirement savings balance among Americans aged 65 to 74 was $200,000 in 2022, per the most recent data from the Federal Reserve. However, the average retirement plan balance for that age group was more like $609,000.

The reason why the average is much higher than the median is that a smaller group of people with large individual retirement account (IRA) or 401(k) balances are skewing the average upward. But if you play your cards right, you could eventually become one of those data skewers, so to speak.

You might assume that retiring with somewhere in the vicinity of $609,000 will mean parting with lots of money through the years. But if you play your cards right, you might manage to build your entire retirement nest egg with a mere $10,000 investment.

It's a matter of time

Most people will need to part with more than $10,000 to build enough savings to last throughout retirement. But if you happen to get your hands on $10,000 at a relatively young age, and you invest that money right away, you could potentially set yourself up to retire with well more than the average balance for 65- to 74-year-olds.

Over the past 50 years, the stock market has averaged an annual 10% return, accounting for both good years and bad. That average is based on the performance of the S&P 500, an index that's often used as a benchmark for the market's performance on a whole. If you invest in a group of S&P 500 stocks or an S&P 500 ETF (exchange-traded fund), you might expect a similar return in your portfolio if you have a similar investment window.

Meanwhile, let's say you start working at age 22 and keep your expenses low that year by bunking with roommates or even moving back in with your parents if that's an option. If you're able to save $10,000, and you then invest that money at a 10% annual return for the next 45 years, you'll be looking at a balance of about $729,000.

That's more than $100,000 above the average $609,000 balance for older Americans. And it's way more than their median $200,000 in retirement savings.

Make the most of a prime opportunity

Of course, not everyone lands in a position to invest $10,000 at age 22. It could take you years to accumulate a sum that large. And you may not be in a position to invest until well into your 30s or even 40s.

The key, though, is to start investing your money as soon as you can. The more time you give it to grow, the more retirement wealth you stand to accumulate.

If you invest $10,000 at age 32 instead of 22, you might only have 35 years for it to grow before you're set to retire. But in that case, you're looking at a balance of about $281,000, which still beats the median savings balance among older Americans, assuming a 10% yearly return.

Now, this isn't to say that your goal should be to accumulate $10,000 toward retirement savings and then call it a day. In either example above, once you've invested that $10,000, you should continue to fund an IRA or 401(k) through the years if you're able to.

The point, however, is that if you start investing your money early enough, $10,000 could be all it takes to accumulate a nest egg you're happy with. So if you manage to save a large chunk of money by a young age, your best bet is to put it to work in the stock market. You may be amazed at how much it grows through the years and how much pressure it takes off of you to save in future years.

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