Want to Retire Comfortably With at Least $1.5 Million? Here's How Much You Should Invest Today.
If you want to retire comfortably, the amount you'll want to aim for is $1.5 million, according to a recent study from insurance company Northwestern Mutual. Given rising inflation in recent years, Americans need to budget much more for retirement than just $1 million (what was seen as the "magic number" back in 2021).
It's a high target, but depending on how much you have saved up, and the number of investing years you have left, it may not be impossible. Here's how much you would need to invest today to be on track to retire with that much in your portfolio.
Determining your strategy and expected annual return is the first step
There are two important variables to consider when trying to determine how much you may need to invest today: investing years and expected returns. Investing years will depend on how much longer you'll be in the workforce. Your expected returns, however, may vary depending on your investing strategy.
If you simply want to mirror the market, you might expect to earn about 10% per year, which is the long-term S&P 500 average. If you want to be more conservative and invest in safer stocks, your returns may be much lower than that. But if you're willing to take on some risk and invest in growth stocks, you have the potential to generate better-than-average returns. While growth equities can leave you exposed to some risk, as long as you have 10-plus investing years left, that may be the ideal option for the long run.
Take the Invesco QQQ Trust (NASDAQ: QQQ). It holds the top 100 non-financial stocks on the Nasdaq. The exchange-traded fund (ETF) makes for a great way to invest in top growth stocks. And with broad exposure, no stock accounts for even 10% of the ETF's overall portfolio. At 8.6%, tech giant Microsoft is the fund's largest holding, followed by Apple at just under 8.1%.
The Invesco QQQ Trust has generated a return of 415% over the past 10 years, and that grows to 456% when including dividend payments. That averages out to a compound annual growth rate of 18.7%. Even the fund's annualized return of 9.7% since its inception in 1999 would beat the S&P 500's average gain around 5.7% over that same period.
How much should you invest today if your goal is to get to $1.5 million by retirement?
Here's how much you would want to plan to invest today to end up with $1.5 million in retirement, based on different time frames and growth rates.
Initial investment at different growth rates | ||||
|---|---|---|---|---|
Years to Retirement | 15% | 10% | 5% | |
40 | $5,600 | $33,142 | $213,069 | |
35 | $11,263 | $53,376 | $271,935 | |
30 | $22,655 | $85,963 | $347,066 | |
25 | $45,566 | $138,444 | $442,954 | |
20 | $91,650 | $222,965 | $565,334 | |
15 | $184,342 | $359,088 | $721,526 | |
Calculations by author.
Investing early has significant advantages, as does targeting a high growth rate. But even though some of these figures may look daunting, it's important to remember this also assumes you just make a single lump-sum investment and don't invest anything else; you can always add to your investments over time. And by having more money invested, through compounding, you can benefit from greater gains down the road.
Simplifying your strategy can make it easier to stay on track
These numbers can help serve as a guide, but generally it's a good idea to invest as much as you can. And putting that money into a growth-focused fund like the Invesco QQQ can be a way to help set you up for the best returns in the long run. Whether it's investing every week, month, quarter, or year, making the process as easy and straightforward as possible can increase the likelihood that you stay on track in meeting your investment goals. If you don't want to track individual stocks, investing in a diversified fund like the Invesco QQQ is a good option for the long haul.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Microsoft. 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.
