Retiring a millionaire isn't easy, but as costs continue to rise, a million-dollar nest egg may be a realistic goal.
The average American expects retirement will cost around $1.7 million, according to a 2022 survey from Charles Schwab. While saving that amount of money may seem like an impossible task, it's more attainable than you might think.
Investing in the stock market is one of the most effective ways to generate long-term wealth, and you don't need to be an experienced investor to make a lot of money. In fact, it's possible to retire a millionaire with next to no effort through exchange-traded funds (ETFs). Here's how.
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When ETFs are a smart option
An exchange-traded fund contains multiple stocks bundled together into a single investment. So when you invest in one ETF, you're actually investing in dozens or even hundreds of stocks at once.
There are seemingly countless ETFs to choose from, with varying levels of risk and reward. Some funds focus exclusively on a single industry, for example, while others are broad-market funds with a wide variety of stocks.
One of the safest options is the S&P 500 ETF. This type of fund tracks the S&P 500 index, which means it includes the same stocks as the index and aims to replicate its long-term performance. Because it's not possible to invest in the S&P 500 itself, an S&P 500 ETF is the next best option.
Because you're investing in stocks from 500 companies at once (from a variety of industries), the S&P 500 ETF can help limit your risk. The S&P 500 itself also has a decades-long track record of recovering from market downturns, which makes it extremely likely that this fund will survive any future volatility.
Perhaps the best part of investing in an ETF, though, is that it requires next to no effort on your part. You don't need to worry about choosing individual stocks, deciding when to buy or sell, or researching companies. Simply invest consistently, then let the fund do the heavy lifting.
Retiring a millionaire with ETFs
With enough time and consistency, you can earn well over $1 million with ETFs while still limiting your risk.
For example, say you're investing in an S&P 500 ETF. Historically, this index has earned an average return of around 10% per year. If you have a goal of reaching $1 million in savings and are earning a 10% average annual return, here's roughly how much you'd need to invest per month, depending on how many years you have to save:
| Number of Years | Amount Invested per Month | Total Savings |
|---|---|---|
| 40 | $200 | $1.062 million |
| 35 | $325 | $1.057 million |
| 30 | $525 | $1.036 million |
| 25 | $900 | $1.062 million |
| 20 | $1,500 | $1.031 million |
Data source: Author's calculations via Investor.gov.
Time is your greatest asset when it comes to building wealth in the stock market, so the earlier you start investing, the easier it will be to reach your goals.
Even if you can't afford to invest hundreds of dollars per month, investing even a little can go a long way. Rather than putting it off, it's wise to contribute whatever you can afford now to give your money as much time as possible to grow.
Retiring a millionaire is a lofty goal, and it's not easy to achieve. But ETFs can be a fantastic option to help you get there. By choosing the right investments and getting started sooner rather than later, you have a much better chance of retiring with $1 million or more.
