Imagine, for a moment, the type of retirement you could enjoy with $1 million in the bank. Reaching the million-dollar mark could be life-changing, and the good news is that reaching this target is not as difficult as it may seem.
Even if you're earning an average salary, it is possible to retire wealthy. However, you'll need to save consistently and make sure you're investing in the right places. By investing $600 per month into this one type of investment, you'll give yourself a good chance of retiring a millionaire by age 60.
Where should you invest?
Saving for retirement is tricky because you'll want your investments to grow as much as possible, but you also want to minimize your risk. Invest too aggressively, and you risk experiencing devastating setbacks. But if you're too conservative, you may fall short of your goals.
A good compromise involves investing in S&P 500 index funds. An index fund is a group of stocks that tracks a particular stock market index. The S&P 500 is one of the biggest and most popular indexes, and it's considered one of the best representations of the stock market as a whole.
When you invest in S&P 500 index funds, you're investing in all the companies that make up the index. Many of these companies are corporate giants, including Amazon (AMZN 0.64%), Apple (AAPL 0.68%), and Alphabet (GOOGL -0.51%). These organizations are some of the biggest in the world, and you'll have a stake in them.
Historically speaking, the S&P 500 has a fantastic track record. It has experienced average rates of return of around 10% per year since its inception, and it's recovered from every downturn, correction, and crash it's ever seen. This means S&P 500 index funds are one of the safest types of investments, but they can also help you retire a millionaire.
The average worker starts saving for retirement at age 31, according to a survey from the Nationwide Retirement Institute. If you began investing $600 per month in S&P 500 index funds at age 31 while earning a 10% annual rate of return, you'd have just over $1 million saved by age 60.
What if you're behind on your savings?
While it's easier to put away a significant amount of money when you start saving earlier in life, that doesn't mean you can't save $1 million if you're already past your early 30s. However, you will need to save a bit more.
If you're 40 years old, for example, and you want to save $1 million by age 60, you'd need to save around $1,500 per month (assuming you're still earning a 10% annual rate of return).
That's a lot of money, but if you have access to a 401(k) with matching contributions from your employer, you won't need to save that much on your own. Depending on your salary and how much your employer will match, you could receive thousands of dollars per year in matching contributions. And that money can go a long way toward reaching your retirement goals.
No matter your age, it's wise to get started saving now. S&P 500 index funds are less risky than many other types of investments, but they can also help your savings grow relatively quickly. By taking advantage of this type of investment, you're one step closer to achieving the retirement of your dreams.