How Investing Just $10 a Day Could Make You a Millionaire by Retirement

Preparing for retirement can feel daunting, and that is perfectly normal. Don't worry; nobody climbs mountains in a single leap, they do it by stepping over small rocks, one by one.

Investing works the same way, especially when your goal is to save up enough money to pay your bills for years after you're too old to continue working for a paycheck.

Anyone can retire a millionaire from investing their retirement savings in the stock market. It can take as little as investing $10 a day.

Here's how that's possible, along with two fantastic investment ideas to help you achieve your retirement goals.

Image source: Getty Images. 

Here is where you may want to invest your retirement savings

Life guarantees nothing except death and taxes, but the U.S. stock market comes about as close to a sure thing as it gets in investing.

The U.S. economy has continued to grow for many decades, resulting in substantial stock market returns over time. It's not a straight line; the market goes through ups and downs. Sometimes, it takes years to recover from a severe downturn. But it has always reached new highs eventually, and it's hard to bet against that for as long as America remains a global economic superpower.

Instead of trying to pick individual stocks, exchange-traded funds (ETFs) offer straightforward and diversified exposure to the U.S. stock market.

You can invest in an index of over 3,500 U.S. companies of all industries and sizes with the Vanguard Total Stock Market ETF. Additionally, the Vanguard S&P 500 ETF is an excellent way to track the S&P 500, a world-renowned index comprising 500 of the most prominent U.S. companies.

Enough time and compounding can turn a daily $10 investment into a fortune

Both of these ETFs have very low fees and a minimum investment of just $1, so yes, you can invest $10 (or less) daily into these funds. But how long will that take to make you a millionaire?

The Vanguard Total Stock Market ETF has generated annualized returns of approximately 9% since its inception in 2001. Meanwhile, the Vanguard S&P 500 ETF has averaged an annual return of 14.5% since 2010. The S&P 500 has returned approximately 10% annually over the past 50 years, so this most recent 15-year stretch has been better than average.

To be conservative, I'll assume investing in both funds generates an annual average return of 9%.

Data source: Calculations by author via a handheld investment calculator. 

A daily $10 investment totals $3,650 in annual savings contributions. As you can see, doing so would take approximately 38 years to reach the million-dollar milestone. Compounding is increasingly effective over time, so it's a tremendous advantage to start investing at a young age.

But what if that can't be your path? Don't worry, here are some other scenarios

If you don't have enough time to sit and wait for nearly four decades, don't worry. You can still accumulate quite a bit of wealth in most scenarios. Here are some hypothetical numbers. Note that the less time you give for compounding, the more you must save to achieve a similar result.

Data source: Calculations by author via a handheld investment calculator. 

You can see how jacking up your savings rate can shave years off your retirement-planning journey. Now, investing $18,250 annually isn't easy for most; it works out to $1,520 per month. Yet it may not be impossible. Some people earn enough to afford similar-sized truck or car payments, but forgo saving for retirement.

That said, the idea should be to prioritize saving and investing enough money for your retirement goals, without sacrificing your quality of life along the way. It's about striking that healthy balance. Do that, and you'll be ahead of the game.