As retirement becomes more expensive, building a nest egg worth $1 million or more is a realistic goal.
However, the majority of Americans are nowhere near that target. Around 80% of workers have less than $250,000 saved, according to a report from the Employee Benefit Research Institute. And of that group, more than one-quarter have less than $1,000 stashed away for retirement.
The good news is that it is possible to retire wealthy, even if you're not rich. By making smart investing decisions, you may be able to retire a millionaire by your 60th birthday.
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Where you invest your money matters
When you're preparing for retirement, saving alone isn't enough; you'll also need to invest. But investing in the right places can be challenging, because there are countless investment options to choose from. Put your money in the wrong place, and you could lose more than you gain.
Exchange-traded funds (ETFs) are a wise choice for many investors. ETFs are collections of stocks grouped together into a single investment, and they allow you to invest in dozens or even hundreds of companies simultaneously.
One type of ETF that is popular among investors is the S&P 500 ETF. These investments track the S&P 500, so they offer consistent growth that follows the market. Despite its ups and downs, the market has historically always seen positive returns over time. By investing in an S&P 500 ETF, your investments will likely see positive growth as well.
Retiring rich with ETFs
There are many different types of S&P 500 ETFs out there, but one in particular to consider is the SPDR S&P 500 ETF Trust (SPY 0.92%).
Over the last 15 years, this ETF has experienced an average return of around 9.52% per year. If you had invested $400 per month in this ETF starting at age 25 and saw returns of, say, 9% per year, you'd have roughly $1.035 million saved by age 60.
Of course, not all investors have the luxury of being able to start saving at age 25. However, if you're able to invest more than $400 each month, you may still be able to reach your $1 million goal. Here's how much you'd need to save each month depending on what age you began saving:
| Age You Began Saving | Amount Saved per Month | Total Savings by Age 60 |
|---|---|---|
| 30 | $650 | $1.063 million |
| 35 | $1,000 | $1.016 million |
| 40 | $1,700 | $1.044 million |
| 45 | $3,000 | $1.057 million |
| 50 | $5,500 | $1.003 million |
Source: Author's calculations, assuming a 9% annual return on investment
Saving thousands of dollars per month may not be feasible for most workers. But another way to retire a millionaire without shelling out so much cash each month is to delay retirement. If you gave yourself seven more years to save and retired at age 67 rather than 60, here's what you'd need to save each month to retire with at least $1 million.
| Age You Began Saving | Amount Saved per Month | Total Savings by Age 67 |
|---|---|---|
| 30 | $325 | $1.008 million |
| 35 | $525 | $1.033 million |
| 40 | $825 | $1.017 million |
| 45 | $1,350 | $1.019 million |
| 50 | $2,300 | $1.020 million |
Source: Author's calculations, assuming a 9% annual return on investment
The bottom line is that the more time you have to save, the less you'll need to save each month to reach the million-dollar mark. Investing in S&P 500 ETFs can also help you achieve relatively consistent growth over the years, which can better protect your savings from extreme ups and downs.
Retiring a millionaire isn't easy. By investing in the right places, however, it's more achievable than you may think.
