4 ways to turn $ 100,000 into $ 1 million in retirement savings


Want to increase $ 100,000 to $ 1 million? While there’s only one zero separating those two numbers, the road to a million dollar savings balance can seem overwhelming.

Fortunately, there are several ways to turn $ 100,000 into a seven-figure retirement nest egg. Here are four strategies that vary in terms of risk and timing.

1. Invest in the S&P 500

The long-term average annual growth rate of the S&P 500 is around 7% after inflation. At this rate of growth, your $ 100,000 would grow to $ 1 million in less than 35 years.

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You can also easily invest in the S&P 500 Index. It’s as simple as buying an index fund, like Vanguard S&P 500 ETF (NYSEMKT: VOO), SPDR S&P 500 ETF (NYSEMKT: SPY), Where IShares Core S&P 500 ETF (NYSEMKT: IVV).

When shopping for S&P 500 index funds, pay attention to the performance of the fund relative to the index. The fund will normally be slightly behind schedule, a difference known as a tracking error. Tracking error occurs because funds have expenses and transactions to manage, while indices do.

The fund’s expenses, expressed as an expense ratio, are usually the largest component of the tracking error. That is why it is important to choose funds with a low expense ratio. When less money is diverted to cover the costs of the fund, more of the performance of the index is transferred to you.

2. Buy real estate

Between March 1992 and June 2021, house prices increased by 5.35% per year on average. Take a few percentage points off for inflation, and the adjusted growth rate is closer to 2.5% or 3%.

That’s less growth than the S&P 500. But with real estate, you can use the financing to boost your starting $ 100,000. Assuming you go for the standard 20% down payment, your $ 100,000 could buy a property worth $ 500,000. If the property appreciates an average of 2.5% per year, it could be worth $ 1 million in 30 years, which is around the time you pay off the loan.

This strategy requires that you collect enough rent to cover the mortgage, taxes, insurance, and maintenance expenses. If your rents do not cover the expenses, you will need to invest more than the initial $ 100,000.

3. Start a business

Another option is to use your $ 100,000 to start a business. It can be a “hero or zero” strategy – meaning you could hit $ 1 million quickly, or you could lose your money.

The wide range of outcomes and variables make starting a business a high risk business. To put this in quantifiable terms, the Bureau of Labor Statistics (BLS) reports that only about 35% of businesses survive 10 years or more.

You can increase your chances of success by finding an experienced entrepreneur who can mentor you. Ideally, your mentor could guide you in researching your business idea, projecting demand and growth potential, and identifying the steps you need to take to successfully launch your business.

4. Invest in yourself

You can also invest in your own training and education, with the aim of earning a higher salary in the future. BLS data supports this strategy. The median earnings of bachelor’s degree holders are around 67% higher than the median earnings of high school graduates. Specifically, the average high school graduate earns $ 40,612 per year, while the average college graduate with a four-year degree earns $ 67,860.

The difference between these salary levels is more than enough to maximize pension contributions to a 401 (k). In 2022, the IRS caps 401 (k) contributions at $ 20,500. If you save and invest that amount every year, your 401 (k) balance would hit $ 1 million in about 22 years. This assumes an annual growth of 7%, in line with the stock market average.

Become a retired millionaire

If you’ve already saved $ 100,000 for your retirement, congratulations, you’ve reached the first milestone on the million dollar path. Your next step is to invest your $ 100,000, either in yourself or in some appreciating asset.

The more time you allow to implement a growth plan, the more predictable your results will be. This is a good reason to launch your $ 1 million plan now. This gives you the best chance of achieving millionaire status when you retire.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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