Is the S&P 500 All You Need to Retire a Millionaire?

The average U.S. worker expects to need approximately $1.7 million to retire, according to a 2022 survey conducted by financial services giant Charles Schwab. But among the survey participants, only around half believe it's very likely that they'll meet their retirement savings goals.

Saving for retirement isn't easy, but it is possible to build a nest egg worth $1 million or more -- even if you're not an experienced investor. With S&P 500 index funds, it's simpler than you might think to turn a few hundred dollars per month into a million-dollar portfolio.

What are S&P 500 index funds?

S&P 500 index funds such as the Vanguard S&P 500 ETF (VOO 1.01%) include just the same stocks as the index -- 500 of the largest public companies in the U.S. -- which creates an instantly diversified portfolio. And as a result, their results mirror the index's performance.

This type of investment is one of the safest out there, partly because the S&P 500 has a long history of recovering from market downturns. Since 1980 alone, the S&P 500 has fallen by at least 10% on 20 separate occasions. Yet no matter how severe those downturns were, it has bounced back from every single one and gone on to set new highs. While there are no guarantees in investing, it's extremely likely an S&P 500 index fund will recover from future downturns as well.

Keep in mind that this doesn't mean your investments won't take hits in the short term. If stock prices continue falling, your portfolio could lose value over the coming weeks or months. Over the long term, though, you're almost guaranteed to see positive average returns.

Reaching millionaire status

Despite being one of the safer types of investments, S&P 500 index funds can help you make a lot of money over time.

Historically, the S&P 500 has earned an average rate of return of around 10% per year. In other words, the annual highs and lows average out to around 10% per year over the long run. So let's say, for example, that you want to retire with $1.7 million -- the amount the average worker expects they'll need to cover their expenses in retirement. Let's also say you can expect to earn an average annualized return of 10% on your portfolio. Here's approximately how much you'd need to invest each month depending on how many years you have left before retirement.

Source: Author's calculations via Investor.gov

Of course, if you only wanted to reach $1 million in savings rather than $1.7 million, you wouldn't need to invest as much per month. For example, if you have 25 years to invest and are earning a 10% average annualized return, investing $850 per month would get you to around $1 million.

Regardless of your goals, starting now and investing as much as you can afford each month can go a long way. Even if the market is in a slump, continuing to invest consistently will put you on the path toward becoming a millionaire.