Some people look at rising costs and lament that, “I’ll have to be a millionaire when I retire!” Though they may say that somewhat facetiously, accumulating a million dollars for retirement may be much more achievable than you think — especially if you can start now with $100,000.
All it takes to turn 100k into a million is one of two things:
- No. 1: Earn a phenomenal rate of return.
- No. 2: Invest for many, many years.
How well you can build wealth all comes down to three factors.
- How much you can invest (and how regularly)
- The amount of time you have
- The growth rate of your investments.
If we start out with the aforementioned 100K, here is the rate of return you will need to parlay it up to a million in a given number of years.
As you can see, with enough time, those are some very achievable rates of return. Consider that the stock market has averaged annual returns of close to 10% over many decades. If you have 30 or 35 years before you retire, just parking that $100,000 in a low-fee, broad-market index fund that tracks the S&P 500 or the entire U.S. market will be likely to get you to $1 million, even if the overall growth rate during that period is below average.
Also, keep in mind, you may not actually need to turn 100k into $1 million to retire. Find out exactly how much you really do need. Spend some time estimating your income and expenses in retirement (being sure to expect high healthcare costs) and figure out how much you can expect from Social Security. You might need to amass a lot less than $1 million.