Everyone has to start somewhere from saving retirement. Even if you don't have any money today, it's possible to build a powerful nest egg when you retire, even with $1 million. Through the ability to compound and invest, you can grow your savings much higher than you can accumulate in your bank account only.
However, it is important to have a plan and know how much you may need to invest regularly to achieve your goals. Below, I'll show you how much you might want to invest based on your age and year of retirement to end up with at least $1 million in portfolio at retirement.
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If you are investing for over 20 years, you may be much better than dividend stocks than dividend stocks. The latter is more suitable for retirement when it is bigger and wants to keep the risk relatively low. However, in the long run, the former can generate greater benefits, but it will bring greater uncertainty and risks in any year. As long as you can endure the tough years for a long time, the reward is worth it.
Instead of purchasing growth stocks yourself, you can invest in many exchange-traded funds (ETFs), which will expose you to many of them. A popular option for growth investors is Pioneer Growth Index Fund ETF (nysemkt:vug). Over the past decade, it's a market-owned fund whose total income (including reinvestment dividends) has risen by more than 240%.
The past cannot predict the future. But by sticking to growing stocks, you put yourself in a good position to achieve great returns in the coming years.
VUG ETF owns more than 160 largest U.S. growth stocks, including Nvidia and Meta Platform. Over the past five years, its constituent stocks have grown an average of more than 26%. The fund also charges a low expenditure ratio of 0.04%, which means the fees don't make a large portion of your income.
To predict how much money you need to save and invest to retire for at least $1 million, you need to consider the number of years you have before retirement and the average gains you make over that timeframe.
You may have some control over your retirement number (in this example, I assume you retire at 65). However, forecasting average returns can be challenging, which can have a significant impact on your overall returns and how much you may need to invest.
Historically, S&P 500 The average annual return is about 10%. To stay conservative, in the table below, I show you the fees required to charge 10% annual returns and 9% returns per month if the market slows down.
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|
| Monthly investment requires $1 million | |
|---|---|---|---|
| age | Years of retirement | Average annual growth is 9% | Average annual growth of 10% |
| 45 | 20 | $1,486 | $1,306 |
| 40 | 25 | $885 | $747 |
| 35 | 30 | $542 | $439 |
| 30 | 35 | $337 | $261 |
Author table and calculation.
These numbers seem high, but they don't need to be discouraged. You can invest in refunds, inheritance, investment income, and any other potential one-time payments to help accelerate the growth of your portfolio. The more money you invest, the more it will over time, and ultimately it can help you get a higher balance.
Knowing the amount you may need can help you create a plan that aligns with your goals and not set too high expectations or depends on the best situation. Either way, trying to put money from regular funds into growth-oriented investments can still help you build a strong portfolio balance when you retire, even if you don't end up getting $1 million.
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Randi Zuckerberg is a sister of former marketing development director, Facebook spokesperson, and Meta Platform CEO Mark Zuckerberg, and a member of the Motley Fools’ board of directors. David Jagielski has no position in any of the stocks mentioned. Motley Fool is in the location and recommends Meta Platform, NVIDIA and Vanguard Index Funds-vanguard Eventry ETFs. Motley Fool has a disclosure policy.
Saving $0? If you want to earn a $1 million portfolio through retirement, how much should you invest per month. Originally published by Motley Fool