4 Ways to Grow $100,000 Into $1 Million for Retirement Savings

If you've saved $100,000 (or more) for retirement, you're ahead of most Americans. Check out the table below, which shows how much workers in America have socked away for retirement, per the 2023 Retirement Confidence Survey.

Source: 2023 Retirement Confidence Survey. *Excluding the value of a primary home.

Much depends on your age and retirement plans, though. If you're 30, having $100,000 is a good start. If you're 60, $100,000 is probably much less than what you need to retire with. Many people aim to amass $1 million by retirement. That's a good goal for many but less than what some will need or want. And if you're still very young, $1 million won't have the same purchasing power in the future as it does today, due to inflation -- so aim for more.

Here are four ways to build a nest egg of $1 million or more. You may want to use more than one.

Image source: Getty Images.

1. Index funds

An index fund is a marvelous wealth-building tool. It's essentially a mutual fund that passively tracks a particular index (such as the S&P 500), holding the same stocks and aiming to deliver roughly the same return (less fees, which tend to be quite minimal). An index fund can be all you need to get to a million dollars or more if you keep adding money over many years.

Here are three to consider:

• Vanguard S&P 500 ETF (VOO 1.00%)
• Vanguard Total Stock Market ETF (VTI 0.93%)
• Vanguard Total World Stock ETF (VT 0.90%)

How long will it take to get from $100,000 to $1 million with index funds? Well, it all depends on how the index performs in your investing period -- and how much you invest. If you're in a low-fee S&P 500 index fund and you happen to earn the S&P 500 average return over the past 30 years of roughly 10%, it will take close to 24 years. If you can add $10,000 each year to your initial $100,000, it will take 18 years. (Of course, adding more each year will get you there faster.)

2. Dividend stocks

Investing in some dividend-paying stocks is another solid road to riches over the long run. In the past, dividend payers have been great performers in general -- as evidenced by the table below, adapted from a Hartford Funds report.

Data source: Ned Davis Research and Hartford Funds.

Healthy and growing dividend payers will regularly inject cash into your investment account -- money that can help support you in retirement or be reinvested for additional shares of stock. If you have a portfolio worth, say, $300,000 with an overall dividend yield of 4%, that will generate $12,000 annually -- about $1,000 per month, on average -- and that sum will likely increase from year to year as well.

This strategy can get you from $100,000 to $1 million in about 26 years if you earn that 9.18% average annual return, from the table above. If you can add $10,000 annually to your investment, it will take just 19 years.

3. Growth stocks

The overall stock market has averaged annual gains of close to 10% over long periods. (Over your particular investing period, it might average somewhat more or less.) If you want to aim for higher-than-average returns, you might add some growth stocks to your portfolio.

Growth stocks are tied to companies growing at a faster-than-average rate. There are lots of them, big and small; some will deliver phenomenal returns, but plenty will flame out, too. So protect yourself by spreading your dollars across a bunch of them. Our Foolish investing philosophy suggests buying into around 25 or more companies and aiming to hang on to your shares for at least five years.

This strategy can get you from $100,000 to $1 million in about 22 years if you earn the 11.2% average annual return (since inception) of the Vanguard Growth ETF (VUG 1.82%). If you can add $10,000 annually to your investment, it will take just 16 years.

4. Value stocks

Finally, another kind of stock to consider is the value stock. Value investing is a strategy popularized by such notables as Warren Buffett, and it involves buying stocks with a margin of safety -- not overpaying for them.

While many growth stocks may be richly valued and as likely to return to a more reasonable level as to keep soaring, value stocks have a good chance of rising to a more reasonable level. You can actually aim for the best of both worlds by seeking growth stocks that happen to be undervalued. Google parent company Alphabet, for example, is a growth stock and is arguably undervalued, too, with a recent forward-looking price-to-earnings (P/E) ratio of 20, below its five-year average of 24.

You might get from $100,000 to $1 million in 28 years if you earn the 8.6% average annual return (since inception) of the Vanguard Value ETF (VTV -0.06%). Add $10,000 annually, and it will take close to 19 years.

Remember that you needn't become a stock-analysis expert or very savvy about dividend stocks, growth stocks, or value stocks. You can just keep adding money to one or more low-fee index funds over many years. That approach will have you benefiting from all four of the kinds of stocks above -- simply and easily.