So you've got $100,000 and you want to build it into $1 million for retirement. That's great -- and it's not such an audacious goal, either. It's rather doable for many people. (Even if you don't have $100,000 you may be able to accumulate $1 million or more -- read on.)
Here's a look at some strategies that can get you from $100,000 to $1 million -- or from $0 to $1 million. See which one(s) seem best for you.
Image source: Getty Images.
1. Save and invest aggressively
First, you'll need to be socking away significant sums -- regularly. The table below shows how your nest egg can grow over time if you start with $100,000 and you're regularly investing an extra $6,000 or $12,000 per year. It uses an 8% average annual growth rate in order to be a bit conservative -- since the stock market has averaged roughly 10% annual growth over many decades. Of course, during your particular investing period, it might average 6% or 12% or some other rate. So, ideally, hope for the best and prepare for the worst .
Starting with $100,000 and growing at 8% for | $6,000 invested annually | $12,000 invested annually |
|---|
5 years | $184,948 | $222,964 |
10 years | $309,765 | $403,638 |
15 years | $493,163 | $669,108 |
20 years | $762,633 | $1,059,171 |
25 years | $1,158,574 | $1,632,301 |
30 years | $1,740,341 | $2,474,416 |
35 years | $2,595,147 | $3,711,760 |
40 years | $3,851,138 | $5,529,825 |
Calculations by author via moneychimp.com .
What if you don't have $100,000?
Of course, many of us don't have $100,000 at the ready. That's OK, because unless you're retiring very soon, you can still amass a meaningful nest egg -- again, if you sock away significant sums regularly. Check out the table below, which assumes you start with $0:
Growing at 8% for | $6,000 invested annually | $12,000 invested annually |
|---|
5 years | $38,016 | $76,032 |
10 years | $93,873 | $187,746 |
15 years | $175,946 | $351,892 |
20 years | $296,538 | $593,076 |
25 years | $473,726 | $947,452 |
30 years | $734,075 | $1,468,150 |
35 years | $1,116,613 | $2,233,226 |
40 years | $1,678,686 | $3,357,372 |
Calculations by author via moneychimp.com .
2. Consider dividend-paying stocks
So how, exactly, should you be investing your long-term dollars if you want them to grow rapidly for you? One powerful way is to invest in dividend-paying stocks . As long as they're tied to healthy and growing companies, their share prices should rise over time, while they deliver regular payouts that will also tend to increase over time.
Dividend-paying stocks are often underappreciated. Check out the table below, adapted from a Hartford Funds report:
Dividend-Paying Status | Average Annual Total Return, 1973-2023 |
|---|
Dividend growers and initiators | 10.19% |
Dividend payers | 9.17% |
No change in dividend policy | 6.74% |
Dividend non-payers | 4.27% |
Dividend shrinkers and eliminators | (0.63%) |
Equal-weighted S&P 500 index | 7.72% |
Data source: Ned Davis Research and Hartford Funds.
You can easily invest in a wide range of dividend-paying stocks via exchange-traded funds (ETFs) such as the:
- Schwab U.S. Dividend Equity ETF
- iShares Core Dividend Growth ETF
- Vanguard Dividend Appreciation ETF
3. Consider growth stocks
If you want to aim for relatively rapid growth, you might invest in some growth stocks -- ones tied to companies growing faster than average. Many growth stocks will deliver phenomenal returns, but understand that plenty will implode or just stagnate, too. So protect yourself by spreading your dollars across a bunch of them.
The Motley Fool's investing philosophy suggests buying into around 25 or more companies and aiming to hang on to your shares for at least five years.
4. Consider simple index funds
If you don't want to take on the risk of some growth stocks, it can make perfect sense to just stick with a low-fee index fund such as one that tracks the performance of the S&P 500 index of 500 of America's biggest companies. (The Vanguard S&P 500 ETF is a good example.)
The long-term annual average return of the S&P 500 is around 10%, so you might earn that in an S&P 500 index fund -- or you might average a higher or lower rate. The stock market doesn't offer guaranteed returns. Over a long period, it's hard to go wrong investing in a wide swath of major American businesses.
5. Stick to the program
Note that you can mix and match some of the approaches above. For example, you might keep half your long-term portfolio in dividend stocks, and the remainder in an S&P 500 index fund and some growth stocks, too.
Whatever you do, understand that you'll need to keep at it for many years. Revisit the tables above and you'll see that the big growth in your portfolio will, ideally, happen after 15 or 20 or 25 years.
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Selena Maranjian has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy .
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