Looking for ways to ramp up your retirement savings plan? Here's an easy one to consider. Carve out an extra $150 from your budget to increase your 401(k) contributions. Then, invest the money in a solid mutual fund that gives you exposure to the largest publicly traded companies. Stick with that program for long enough and it could add $350,000 or more to your nest egg balance at retirement.

The most popular mutual fund among 401(k) investors today is the Vanguard Institutional Index Fund (NASDAQMUTFUND:VINIX), according to a Brightscope report compiled for business publisher Kiplinger. The fund seeks to track the performance of the S&P 500 index, a basket of the largest 500 or so public companies in the U.S., including Apple, Microsoft, Amazon, Alphabet, Facebook, and Berkshire Hathaway. Over the last 10 years, that basket of companies has grown, on average, 13.74% per year. Over the same time period, the Vanguard fund has produced annual returns of 13.71% for its shareholders.

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VINIX is one of many mutual funds that tracks the S&P 500 index. If you don't have access to this fund in your 401(k), you likely have access to one of its competitors. In that case, look for a fund with a low expense ratio and a history of returns that are just a shade off the index being tracked. These two factors are related. Generally, the variance between an index's returns and the returns of a fund tracking that index is largely related to expenses. You can see this dynamic with the Vanguard fund; its expense ratio is 0.035% and its performance tracks closely to the underlying index. At the opposite end of the spectrum is the Rydex S&P 500 Fund (NASDAQMUTFUND:RYSPX), which has an expense ratio of 1.68% and lower 10-year average returns of 11.7%.

The power of increased contributions

Now, on to how VINIX or a similar S&P 500 index fund can improve your balance sheet at retirement. The wealth you can build is a function of how much you invest, for how long, and at what rate of return. The rate of return is the obvious wildcard in that equation. One starting point is the fund's historic returns. History doesn't predict the future, but it can tell you how well an S&P 500 index fund has achieved its objective of matching the index's performance. If the fund has historically moved in lockstep with the index, you can set your expectations with long-term market returns.

VINIX's 10-year returns of 13.71%, for example, are fabulous -- though possibly not realistic over longer time periods. The fund's 30-year growth rate of 10% is a more conservative starting point, mostly because it aligns with the long-term average growth rate of the stock market before inflation. Knock off 2% to account for inflation and that gets you to a projected annual real return of 8%.

The table below shows the monthly contributions required to reach $350,000, based on an 8% growth rate and various retirement timelines.

Years Until Retirement

Monthly Contribution

Balance at Retirement

Cumulative Out-of-Pocket Contributions





























Table data source: Author calculations. 

As you can see, when you have 35 or 40 years on your side, it's possible to add $350,000 to your retirement savings balance with an extra contribution of $150 or less. The shorter your timeline, though, the more you have to contribute monthly to reach that $350,000 number. Also take note of how the cumulative out-of-pocket contributions vary based on the years you have to save. Raise your contribution early enough and you can keep your out-of-pocket costs low by relying on compound earnings to triple, quadruple, or quintuple your money over time.

Don't wait to save

Even a modest increase to your 401(k) contributions today can make a sizable difference in your retirement savings balance tomorrow. Put those extra dollars into a low-cost index fund and let time work its magic on your balance.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.