I mentioned to a friend not so long ago that I'd sold some stocks in my brokerage account to make room for another investment I was interested in. His response? "I've really got to start investing, don't I?"
I didn't want to make matters worse, but in my head, I was thinking, "Um, yes." See, this friend of mine is almost 40 and hasn't started building his retirement nest egg. And if I'm being honest, I'm kind of worried that if he doesn't start soon, he's not going to end up with enough savings for a comfortable retirement.
But I know a big reason he hasn't started investing is that money is perpetually tight in his world. He's the sole breadwinner at home and is juggling the many expenses that come with raising kids. So it's hard to find the money to invest with.
That said, I wish my friend realized that investing even a small amount of money each month has the potential to really do a lot. In fact, you may be surprised at what a $100 monthly investment can do for your future.
The numbers may surprise you -- in a good way
It's natural to assume that if you want to retire with a lot of money, you have to invest a lot of money month after month. I'm here to tell you that you can accumulate a large retirement nest egg even if you never contribute more than $100 a month to an IRA or 401(k) plan. In fact, if you invest $100 a month over 40 years, you could end up with a portfolio worth $531,000.
However, that number hinges on a very big assumption, and it's that your portfolio is generating an average yearly 10% return. But achieving that 10% may be more doable than you'd think.
That's because over the past 50 years, the stock market has averaged that same return based on the performance of the S&P 500 index. So if you load a portfolio with S&P 500 index funds, which are passively managed funds that basically have you invested in the index itself, you might enjoy that same return on your savings. And thanks to the power of compounded returns, with a 40-year investment window, you can turn a total of $48,000 in retirement plan contributions into $531,000.
Of course, your ending balance will look different if you wait to start building a retirement nest egg and therefore don't have 40 years to save that $100 every month. If you save $100 a month for 30 years, your ending balance may only come to about $197,000, assuming that same 10% return. That's a decent amount of savings -- and about $77,000 more than the average baby boomer has today, according to Northwestern Mutual. But it's a far cry from $531,000.
Invest any amount of money you can, as soon as you can
If you're in the same boat as my friend, you may be turned off from investing due to a lack of money. What I wish my friend would realize is that it's worth it to invest $20 a month here, or $40 a month there, or whatever you can afford.
We just saw how much a $100 monthly investment can do over time. But if you can't swing $100 a month, invest something. The more years you give your money to grow, the better your results are apt to be.
FAQs
In fact, if you invest $100 a month over 40 years, you could end up with a portfolio worth $531,000. However, that number hinges on a very big assumption, and it's that your portfolio is generating an average yearly 10% return.
How much will I have in 30 years if I invest $100 a month? ›
You plan to invest $100 per month for 30 years and expect a 6% return. In this case, you would contribute $36,000 over your investment timeline. At the end of the term, your bond portfolio would be worth $97,451. With that, your portfolio would earn more than $61,000 in returns during your 30 years of contributions.
How much is $500 a month invested for 40 years? ›
The short answer to what happens if you invest $500 a month is that you'll almost certainly build wealth over time. In fact, if you keep investing that $500 every month for 40 years, you could become a millionaire. More than a millionaire, in fact. Investing is about buying assets you believe will increase in value.
How much would you have for retirement if you saved $100 a month? ›
An individual who saves $100 a month from age 25 to age 65 and invests it to earn 7.5% per year will have approximately $292,000 at age 65. If they wait until age 35 to start saving, they will end up with $148,000, and waiting until age 40 leaves only $98,000 in savings at retirement.
Is $100 a month good for a 401k? ›
Your Retirement Savings If You Save $100 a Month in a 401(k)
If you're age 25 and have 40 years to save until retirement, depositing $100 a month into a savings account earning the current average U.S. interest rate of 0.42% APY would get you to just $52,367 in retirement savings — not great.
What happens if you invest $100 a month for 40 years? ›
In fact, if you invest $100 a month over 40 years, you could end up with a portfolio worth $531,000. However, that number hinges on a very big assumption, and it's that your portfolio is generating an average yearly 10% return. But achieving that 10% may be more doable than you'd think.
How much do I need to invest to make $1 million in 30 years? ›
To save a million dollars in 30 years, you'll need to deposit around $850 a month. If you make $50k a year, that's roughly 20% of your pre-tax income. If you can't afford that now then you may want to dissect your expenses to see where you can cut, but if that doesn't work then saving something is better than nothing.
How much do I need to invest a month to become a millionaire in 10 years? ›
Save as Much as You Possibly Can
“Say you're going to average 10% a year on your investment return — you're going to need to save about $5,000 each month to save $1 million.”
Can I retire at 65 if I have $1 million in a 401k and will receive $2500 monthly from social security? ›
Well, it certainly depends on your standard of living. But for most people the answer is yes. This should be enough to generate a comfortable income in most parts of the country.
How much will I have if I invest $1000 a month for 30 years? ›
Investing $1,000 per month for 30 years at a 6% rate of return hypothetically will give you an investment portfolio worth more than $1 million. This result is hypothetical because it doesn't take into account taxes, fees, varying rates of return and other variables, such as extended market downturns.
If you earn $75,000 per year, you can expect to receive $2,358 per month -- or about $28,300 annually -- from Social Security.
Can I retire at 60 with 100k in savings? ›
Taking the same calculations as if you plan to retire at 50, suppose you plan to retire at 60 with $100k in savings, and you need this money to last for now 20 years until the age of 80. Without including income from other sources, this would leave you with a monthly income of just $417.
What is the $1000 a month rule for retirement? ›
The $1,000 per month rule is designed to help you estimate the amount of savings required to generate a steady monthly income during retirement. According to this rule, for every $240,000 you save, you can withdraw $1,000 per month if you stick to a 5% annual withdrawal rate.
How much is $100 a month for 30 years? ›
Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100. If you make a monthly investment of $200, your 30-year yield will be close to $400,000.
How much do I need in 401k to get $2000 a month? ›
According to the $1,000 per month rule, retirees can receive $1,000 per month if they withdraw 5% annually for every $240,000 they have set aside. For example, if you aim to take out $2,000 per month, you'll need to set aside $480,000. For $3,000 per month, you would need to save $720,000, and so on.
At what age should you have 100k in your 401k? ›
“By the time you hit 33 years old, you should have $100,000 saved somewhere,” he said, urging viewers that they can accomplish this goal. “Save 20 percent of your paycheck and let the market grow at 5% to 7% per year,” O'Leary said in the video.
How much is $100 a month for 10 years? ›
(Enter "$100" in the "Contribution amount" field, then select "Monthly" for the "Contribution frequency" option.) You would end up with $32,023.26 after 10 years, compounded daily (assuming 365 days a year). The interest would be $10,023.26 on total deposits of $22,000.
What if I invest $200 a month for 20 years? ›
Investing as little as $200 a month can, if you do it consistently and invest wisely, turn into more than $150,000 in as soon as 20 years. If you keep contributing the same amount for another 20 years while generating the same average annual return on your investments, you could have more than $1.2 million.
How much will 100k be worth in 30 years? ›
Answer and Explanation: The amount of $100,000 will grow to $432,194.24 after 30 years at a 5% annual return. The amount of $100,000 will grow to $1,006,265.69 after 30 years at an 8% annual return.
