You don't have to start investing super early to end up with a big nest egg.
Many people can't afford to start investing early in life. But it doesn't mean that if you start later, it's too late to invest and that you can't end up with a great retirement fund. Also, as you advance in your career, wages should increase, and there's the potential to invest more (on a monthly basis) than if you had started years earlier. So you may not be at a huge disadvantage.
Below, I'll show you how much you would need to invest each month if you're 40 years old or have 25 investing years until retirement in order to end up with a portfolio worth at least $1 million.
Investing more money can make up for lost time
When you're saving and investing for the long term, there are three important variables to consider: time, money, and risk. For example, you can make up for having less time by investing more money and/or by taking on a bit more risk. In an extreme situation where you don't have many investing years left or much money to invest, the only lever you can pull is risk, which clearly isn't ideal when you're talking about retirement.
But if you've got 25 investing years left, you still have plenty of time. The S&P 500 has averaged a long-run return of approximately 9.7%. If you were to generate that kind of return over a period of 25 years, an investment could grow to 10 times its value. That would mean investing $100,000 could potentially turn into $1 million with a fairly safe investment that mirrors the market.
Top growth funds can make the most of your money
You can accelerate your returns by investing in a potential market-beating investment, such as the Invesco QQQ Trust (QQQ 0.98%). The exchange-traded fund (ETF) gives you exposure to the Nasdaq-100 index, which includes the largest non-financial stocks on the exchange. Its top holdings include such big names as Apple, Microsoft, Nvidia, and other stocks that will be familiar to tech investors.
In 10 years, the fund has generated total returns (including dividends) of 473%. That averages out to a compound annual growth rate of 19%. But for the sake of being conservative, let's assume that you will average a smaller return, but one which would be modestly higher than the S&P 500's gains.
Here's a breakdown of just how much you would need to invest per month at different growth rates, assuming that you have 25 years to go until retirement:
| Growth Rate | Monthly Payment |
|---|
| 10% | $753.67 |
| 11% | $634.46 |
| 12% | $532.24 |
| 13% | $445.02 |
| 14% | $370.94 |
| 15% | $308.31 |
Calculations by author.
As you can see, there's definitely an incentive to target a potentially market-beating fund rather than just mirroring the index. While the S&P 500 can offer some stability and safety, by taking on a bit more risk and investing in a tech-heavy fund like the Invesco ETF, you may require smaller monthly payments.
Returns are never guaranteed, of course, but by focusing on the top tech and growth stocks on the Nasdaq, that's a reasonable risk to take on -- and the benefits for your portfolio can be significant.
Investing is never a bad idea, regardless of your age
Your investing strategy may change over time, but there are so many stocks and ETFs to invest in which can give you plenty of options to choose from. If you've started early, you can take on a bit more risk and focus heavily on growth stocks and tech. If you're closer to retirement, then safe blue chip stocks which pay dividends may make a lot more sense.
But the key thing is to try and save and invest money on a regular basis. Even in retirement, stocks can be valuable sources of recurring dividend income.
And there's the potential that an investment does better than you expect, which is why it's generally a good idea to invest in quality stocks. While not every year may be a good one for the markets, in the long run, good, quality investments will rise in value.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends Nasdaq and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
FAQs
We recommend investing at least 15% of your gross household income. For example, a 40-year-old making $80,000 who invests $1,000 a month in good growth stock mutual funds could retire with a $1.5 million nest egg at 65. Not too shabby, right?
How much money do I need to invest to make $3000 a month? ›
If the average dividend yield of your portfolio is 4%, you'd need a substantial investment to generate $3,000 per month. To be precise, you'd need an investment of $900,000. This is calculated as follows: $3,000 X 12 months = $36,000 per year.
What happens if you invest $100 a month for 40 years? ›
The numbers may surprise you -- in a good way
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 money should I put in an ETF? ›
You expose your portfolio to much higher risk with sector ETFs, so you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don't use these at all.
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.
Can I retire at 40 with 1 million dollars? ›
Retiring at 40 may sound like a pipe dream. But it's entirely within reach if you save $1 million while working. The key elements for achieving this feat are sticking to a budget and implementing a comprehensive retirement strategy.
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.
Can you live off $3,000 a month? ›
Can You Live on 3000 a Month? Whether $3000 a month is good for you depends on the number of family members you have and the quality of living you want to sustain. If you're single and don't have a family to take care of, $3000 is enough to get you through the month comfortably.
How much do I need to invest per month to become a millionaire? ›
So, what do you need to do to have $1 million after five years? If you have never invested before (you have zero balance in your investment account), you need to invest approximately $12,821 at the end of every month for the next five years.
Should I invest $100 in S&P 500 every month? ›
$100 a month invested from age 25 to 65 is $1,176,000. You do NOT have to retire broke. A lot of people will want to argue with me on that rate of return. But here's the truth: Historically, the 30-year average return of the S&P 500 has been about 10–12%.
It's never too late to start saving money for your retirement. 401(k)s and traditional individual retirement accounts (IRAs) are among the most popular choices. Roth IRAs, tax-advantaged products, and real estate can be other good retirement investment options.
How much money do I need to invest to make $1000 a month? ›
Invest in Dividend Stocks
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
What is the 4% rule for ETF? ›
The 4% rule says people should withdraw 4% of their retirement funds in the first year after retiring and take that dollar amount, adjusted for inflation, every year after. The rule seeks to establish a steady and safe income stream that will meet a retiree's current and future financial needs.
How many ETFs should I own as a beginner? ›
The majority of individual investors should, however, seek to hold 5 to 10 ETFs that are diverse in terms of asset classes, regions, and other factors. Investors can diversify their investment portfolio across several industries and asset classes while maintaining simplicity by buying 5 to 10 ETFs.
Should I just put my money in ETF? ›
For most individual investors, ETFs represent an ideal type of asset with which to build a diversified portfolio. In addition, ETFs tend to have much lower expense ratios compared to actively managed funds, can be more tax-efficient, and offer the option to immediately reinvest dividends.
What should a 40 year old invest in? ›
Consider opening an individual retirement account (IRA) or a health savings account (HSA). Both can provide an added boost to the quality of your life in retirement — with added tax advantages, too. Don't skip retirement savings to pay for college. This could be a costly mistake.
Is investing $50 a month worth it? ›
It actually works in your favor to start investing early—even with as little as $50 a month—rather than to wait until you have a few thousand dollars saved up. Although investing involves risk, through time and the power of compounding, your $50-a-month investment can contribute significantly to larger financial goals.
What is a good net worth at 40? ›
By the time you reach age 40, prevailing wisdom says you should have a net worth equal to about twice your annual salary. Hopefully, you climbed the salary ladder a bit in your 30s, too. If you're making $80,000 annually, for example, your goal should be to have a net worth of $160,000 at age 40.
How much 401k should I have at 40? ›
Fidelity says by age 40, aim to have a multiple of three times your salary saved up. That means if you're earning $75,000, your retirement account balance should be around $225,000 when you turn 40.
