4 Ways To Grow $100,000 Into $1 Million for Retirement Savings

If you already have $100,000 saved for retirement, you’re well on your way to reaching $1 million in savings.

Turning that $100,000 into $1 million may seem like a daunting task. But the truth is that the first $100,000 is the hardest. Compounding will start to snowball quickly once you hit six figures in retirement savings. Your job is to ensure the ball keeps rolling and add to it if you can.

Here are four ways to grow $100,000 into $1 million for retirement.

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1. An S&P 500 index fund

An S&P 500 index fund isn’t going to provide market-beating returns, but it will ensure that you don’t fall behind the average. That’s a surprisingly tough task to accomplish. Over 90% of actively managed mutual funds fail to outperform the S&P 500 (after accounting for fees) over the long run. So, there’s a reason an S&P 500 index fund is Warren Buffett’s top investment recommendation.

The S&P 500 historically produces an average compound total return of 10.2% per year. That’s a result of price appreciation and reinvesting dividends. If you take your $100,000 and put it in an S&P 500 index fund, you could end up with over $1 million within 24 years if the index produces returns in line with its historical average.

If you keep saving, you can get there even faster. If you invest just $500 per month into the fund on top of the initial $100,000, you’ll get there in less than 20 years on average. Adding $1,000 per month will get you to $1 million within 17 years.

There are a lot of great S&P 500 index funds. Two of the best exchange-traded funds (ETFs) in the industry are the Vanguard S&P 500 ETF (VOO 0.37%) and the SPDR S&P 500 ETF Trust (SPY 0.36%).

2. Growth stocks

Growth stocks are one way you could potentially generate better returns for your portfolio. A growth stock exhibits higher-than-average revenue growth with expectations for strong earnings growth in the future.

These stocks typically trade at high valuations based on their current financial performance because the expected future earnings are higher than average. That can mean increased volatility in prices as the future comes into focus and expectations turn out to be below or above actual results. Macroeconomic factors, such as interest rates, can have a much bigger effect on growth stocks than on other stocks, too.

In exchange for weathering that volatility, investors expect to see better-than-average returns from growth stocks. But to protect against the likelihood that some companies won’t pan out, it’s important to keep a diversified portfolio of growth stocks. You can do that by buying individual stocks, or by simply buying a growth-focused ETF. One option is the Vanguard Growth ETF (VUG 0.74%).

3. Dividend stocks

When a company consistently generates more cash than it can reinvest in its business, it often chooses to pay its shareholders a dividend. Some of the best dividend stocks will increase their payout every year. These dividend growth stocks can provide market-beating returns if you reinvest the dividends.

For the 50 years leading up to 2023, dividend growth stocks outperformed non-payers by a wide margin while exhibiting less volatility, according to research from Hartford Funds. Dividend growth stocks have the added benefit that you can opt to use the dividends for living expenses in retirement once you’ve finished accumulating your savings.

You can opt to select individual dividend stocks, but you can also simply buy a dividend or dividend growth ETF. The Vanguard Dividend Appreciation ETF (VIG 0.03%) is full of great dividend growth stocks while still offering a yield in line with the overall market.

4. Small-cap value stocks

Small-cap value stocks have historically outperformed the S&P 500 and large-cap stocks. These stocks belong to smaller companies that trade at a below-average valuation based on their earnings. As a group, small-cap value stocks historically returned 14.1% annually, according to data compiled by Bridgeway.

Investing in smaller companies comes with some risks, though. Notably, small-cap stocks are more susceptible to macroeconomic factors, such as interest rates.

Small-cap value stocks have notably lagged the market for the last decade or so. But over longer time horizons, they’ve historically provided better returns. If you can hold on to your stocks while the rest of the market outpaces value stocks, you could come out better in the long run.

Some index funds that might appeal to those interested in small-cap value stocks include the Vanguard Small-Cap Value ETF (VBR 0.56%) or the SPDR S&P 600 Small Cap Value ETF (SLYV 0.72%). The latter only invests in stocks included in the S&P 600 index, which requires a company to show consistent profits. As such, those stocks are considerably less risky than unprofitable small-cap stocks.

Focusing on any of the above strategies is a great way to help you turn your $100,000 into $1 million with consistent investments.