Building a decent nest egg is much easier if you don't have to do all the heavy lifting on your own.
For most of us, getting started is the toughest part of investing. Once you have a decent foundation saved up, compounding can play an incredibly powerful role in getting you the rest of the way to a comfortable nest egg.
With that in mind, these four ways to grow $100,000 into $1 million for retirement savings are designed to inspire you to get that foundation in place. After all, once that first $100,000 is in place, your work may not be over, but the path to millionaire status can get a lot smoother.
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1. Let compounding work its magic on its own
Nobody can guarantee what stocks will do, but those of us who invest do so with the expectation that the overall market will likely rise over time. At the market's long-run historical return rate of around 10% per year, $100,000 will turn into $1 million all on its own in around 24.2 years.
In other words, if you can scrounge up that first $100,000 by the time you turn 40, then you've got a decent shot of retiring a millionaire by 65, simply based on what you've already saved.
2. Keep on socking away the money you've been investing
Of course, there are no guarantees that the market will keep going up -- especially at that pace. As a result, it's rather risky to put all your faith in compounding to get you there.
Fortunately, you've likely been saving something to build up that first $100,000. Generally speaking, it's a lot easier to keep on saving money than it is to start saving it in the first place. So why not keep on investing as your nest egg gets larger, to help that compounding work even better?
The table below shows how many years it takes to take a nest egg from $100,000 to $1 million, based on the amount you're able to 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 |
$300 | 20.4 | 24.8 | 31.6 | 43.7 |
Calculations by author. Assumes smooth returns and consistent investments each month.
Every little bit helps. Even $300 a month -- around $10 per day -- is enough to take years off the time it takes to get your money to reach the $1 million threshold. In addition, the more you're able to add to your stockpile each month, the sooner it can reach that goal, even if the market performs well below its historical return rates.
3. Enlist Uncle Sam's help
One way to get more money compounding for you than you could put away on your own is to make your investments inside a traditional 401(k). In a traditional-style 401(k), money you invest comes directly out of your paycheck, before income taxes.
As a result, if you're in the 24% tax bracket, every $100 you invest inside your traditional 401(k) would really only cost you $76 of otherwise spendable money. If your state also has an income tax, then the out-of-pocket cost to you could be even lower.
4. Ask your boss to kick in a bit, too
In addition to Uncle Sam's help, your boss may also help provide a boost to your retirement savings. Many companies offer a match when employees elect to put money aside for their retirement inside the company's 401(k) plan.
Matches vary by employer, but a common one is $0.50 per every dollar the employee contributes, up to 6% of that employee's salary. In that scenario, for every $100 you're investing up until you exhaust your match, your boss kicks in another $50, making the total $150 working on your behalf.
Put a match together with a tax deduction in a traditional 401(k), and you just might be able to sock away around twice as much as you would be able to on your own in an after-tax account.
Get started now
Whether you've already reached that $100,000 milestone or are just beginning your journey to get there, the reality is that it will take time to build a $1 million nest egg for your retirement. The sooner you get started, the more of that time you have available to you, and thus the better your chances of reaching millionaire status by the time you retire.
So get started now, and give compounding, your continued savings, Uncle Sam, and your boss the longest possible runway to work together to help you achieve that goal.
FAQs
There are two approaches you could take. The first is increasing the amount you invest monthly. Bumping up your monthly contributions to $200 would put you over the $1 million mark. The other option would be to try to exceed a 7% annual return with your investments.
How to build wealth with $100,000? ›
6 approaches and strategies to invest $100,000
- Park your cash in an interest-bearing savings account.
- Max out contributions to retirement accounts.
- Invest in ETFs.
- Buy bonds.
- Consider alternative investments.
- Invest in real estate.
There are two approaches you could take. The first is increasing the amount you invest monthly. Bumping up your monthly contributions to $200 would put you over the $1 million mark. The other option would be to try to exceed a 7% annual return with your investments.
How would you diversify a $100000 investment? ›
Buying shares in a mutual fund, exchange-traded fund (ETF), or index fund can be a great option if you want to avoid picking individual investments. All of these funds hold baskets of assets that provide a simple way to diversify your portfolio, but there are some differences worth noting.
How much do I need to invest a month to become a millionaire in 10 years? ›
Save as Much as You Possibly Can
“Say you're going to average 10% a year on your investment return — you're going to need to save about $5,000 each month to save $1 million.” Moore recommends putting this money into an employer-sponsored retirement savings account, if possible.
Where is the safest place to put $100,000? ›
Deposit accounts—like savings accounts, CDs, MMAs, and checking accounts—are a safe place to keep money because consumer deposits are insured for up to $250,000, either by the FDIC or NCUA.
How long does it take to turn $100000 into $1000000? ›
If you take your $100,000 and put it in an S&P 500 index fund, you could end up with over $1 million within 24 years if the index produces returns in line with its historical average. If you keep saving, you can get there even faster.
How long does it take 100k to double? ›
How To Use the Rule of 72 To Estimate Returns. Let's say you have an investment balance of $100,000, and you want to know how long it will take to get it to $200,000 without adding any more funds. With an estimated annual return of 7%, you'd divide 72 by 7 to see that your investment will double every 10.29 years.
How to create passive income with 100k? ›
When thinking about how to invest 100k for passive income, again, REITs are the answer. For example, some REITs pay dividend yields of 5% or more. Some REITs also pay monthly dividends, such as Realty Income Corp., which would generate a monthly income of between $350 and $400.
Where to put 100k right now? ›
With $100,000 to invest, you have a plethora of options for how to invest the money. You can park it somewhere safe, like a CD or high-interest savings account, or you can take a little risk and invest in the stock market. If you go the investing route, you can choose how much risk you want to assume.
Stocks are a popular investing choice; historically, they have delivered an average yearly return of about 10%. This means that a $1 million investment in the stock market could potentially earn you around $100,000 per year in interest.
What is the best investment right now? ›
11 best investments right now
- High-yield savings accounts.
- Certificates of deposit (CDs)
- Bonds.
- Money market funds.
- Mutual funds.
- Index Funds.
- Exchange-traded funds.
- Stocks.
Annual compound interest earnings:
At 4.25%, your $100,000 would earn $4,250 per year. At 4.50%, your $100,000 would earn $4,500 per year. At 4.75%, your $100,000 would earn $4,750 per year. At 5.00%, your $100,000 would earn $5,000 per year.
How to turn 100k into a million? ›
Active Investing Of $400 Per Month For 20 Years
For those looking to expedite their retirement savings, investing an additional $400 per month can be effective. With a 10% average annual return, this strategy could increase your savings from $100,000 to $1 million in just over 20 years.
Can I live off interest on a million dollars? ›
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
What investment makes 10% a year? ›
Diversifying Your Portfolio to Reach a 10% Return
A diverse portfolio could consist of 30% in a mix of value and growth stocks, 30% in index funds, 20% in bonds, 10% in real estate and 10% in alternative investments like P2P lending or commodities.
How much interest will 100k earn in a year? ›
Annual compound interest earnings:
At 4.25%, your $100,000 would earn $4,250 per year. At 4.50%, your $100,000 would earn $4,500 per year. At 4.75%, your $100,000 would earn $4,750 per year. At 5.00%, your $100,000 would earn $5,000 per year.
How to make money from 100k? ›
3. Invest in Government Bonds. One of the best things to do with 100K is to invest in corporate bonds. They're considered very low risk since they're both backed by the government and the Financial Services Compensation Scheme.
How much income can 100k generate? ›
You can generate monthly income from 100k by investing in a mix of assets, such as dividend-paying stocks, bonds, or REITs. Depending on the assets you choose and their performance, you may expect to yield a monthly income ranging from a few hundred dollars to over a thousand dollars.
Is $100000 considered rich? ›
The median salary for Americans is around $70,000 a year, according to the most recent census data from 2021. A salary of $100,000 a year, with the assumption that you are an individual without dependents, would classify an individual as upper-class — but many of these people don't feel rich.
