How to Turn $100,000 Into $1 Million for Retirement: 3 Smart Investment Strategies

As you think about and plan for retirement, you may be wondering how to get to a nest egg of $1 million. (Note, though, that the precise amount you will need for retirement might be more or less than that.) Let’s see how you can grow your wealth — whether you start with $100,000 or $0 or some other sum.

There are multiple ways you can achieve your financial goals. I’ll review a few here. Even if you’re very late to retirement planning, you may be able to significantly improve your financial condition.

Image source: Getty Images.

I mentioned $100,000 because lots of people feel that they’re behind in saving for retirement, but many might have saved that much by now. If you have less than that, take heart — you’re not alone. Check out these numbers from the 2024 EBRI/Greenwald Research Retirement Confidence Survey.

Source: 2024 EBRI/Greenwald Research Retirement Confidence Survey. *Excluding the value of a primary home.

See? Fully 47% of workers had less than $100,000 socked away, and 29% had less than $25,000.

1. Index funds for the win!

For most of us, simple low-fee index funds that own shares in a variety of stocks can be all we need to amass significant wealth. An index fund tracks a particular index of securities, aiming to deliver roughly the same return (less fees) by owning roughly the same securities. So an S&P 500 index fund would aim to deliver roughly the same results as the index — which has averaged annual gains of close to 10% over many decades, though that includes up years and down years and isn’t guaranteed to be up when you need the money.

To do some math, here’s how your money would grow over time at 8%. The table below assumes you start with $0:

Calculations by author.

As long as you’re not retiring soon, you may be able to get to that $1 million goal. Remember, too, that you can speed up the process if you can sock away more money regularly, especially in your early years, giving those dollars more time to grow. And if you’re starting with $100,000, you’ve got a great head start!

Here are three index funds to consider:

• Vanguard S&P 500 ETF (NYSEMKT: VOO): This fund has a very low annual fee and includes the shares of 500 of the biggest companies in America, which together make up around 80% of the entire U.S. market.
• Vanguard Total Stock Market ETF (NYSEMKT: VTI): This ETF has a wider scope, aiming to own shares of all U.S. stocks, including the small and medium-sized ones that don’t make it into the S&P 500.
• Vanguard Total World Stock ETF (NYSEMKT: VT): This ETF aims to encompass just about all the stocks in the world.

2. Dividend stocks

While index funds can be all you need, you may want to consider dividend-paying stocks for your portfolio, too, as they have beaten other types of stocks.

Data source: Ned Davis Research and Hartford Funds.

If you have, say, $300,000 invested in dividend payers with an overall dividend yield of 4%, that would generate $12,000 annually — about $1,000 per month. That’s very handy income in retirement, and it doesn’t require you to sell any shares, either. Better still, healthy and growing dividend payers tend to increase their payouts over time, which can help you keep up with inflation.

3. Growth stocks

If you want to aim for much higher average annual growth rates for your portfolio, you might add some growth stocks to it. Just know that this introduces more risk — because while many growth stocks will deliver phenomenal returns, others will flame out. Growth stocks tend to grow faster than other stocks, but when circumstances change, they can fall harder.

You might try to manage the risk by spreading your dollars across a bunch of them. The Motley Fool investing philosophy suggests buying into around 25 or more companies and aiming to hang on to your shares for at least five years. Investing is best used as a long-term money-making effort. 

Those are three approaches to building your wealth as you aim for a million dollars or more. You don’t have to choose just one of them, either. You might engage in them all, to some degree.