My No 1. Strategy for a Millionaire Retirement

Retirees need plenty of money to supplement Social Security if they want a life free of financial worries in their later years. Having at least $1 million invested can help you produce the income you need as a senior once paychecks stop coming. But becoming a millionaire retiree can be a challenge.

The good news is, there are multiple possible paths to growing a seven-figure nest egg. Three Motley Fool retirement experts are here to share what their strategies would be for ending up with $1 million or more saved by the time retirement rolls around.

Invest consistently — even if the market is volatile

Katie Brockman: Stock market volatility is intimidating, and it can be tempting to stop investing or even pull your money out of the market altogether when stock prices start to fall. However, this strategy could hurt your long-term savings more than you may think.

Nobody can predict when a downturn will occur, and trying to time the market is risky. Say, for example, you sell your investments because you believe a crash is looming. There’s always a chance the market won’t actually crash and prices will continue increasing. In that case, you’ll miss out on those earnings by selling.

Say, also, that you decide to reinvest at a later time. If prices have continued increasing, you could end up paying more for your investments than what you sold them for. While selling during periods of volatility may seem smart, it could cost you a lot of money over time and make it harder to reach your retirement goals.

In addition, continuing to invest during market downturns can actually be a cost-effective strategy. When the market is in a slump, stock prices are lower. This is a fantastic opportunity to invest more when the market is essentially on sale. By loading up on quality investments when their prices are lower, you can help your savings grow faster without breaking the bank.

If your goal is to retire a millionaire, it’s important to have the right strategy. It may seem counterintuitive to continue investing even when the market takes a turn for the worse. However, by investing consistently — even during periods of volatility — you can maximize your savings over the long run.

Start early

Maurie Backman: When it comes to building wealth for retirement, time is the most effective tool at your disposal. That’s why I recommend a retirement savings strategy that has you funding your IRA or 401(k) plan steadily from a young age.

It’s easy to put off retirement savings when other expenses pop up, like mortgage payments and credit card bills. But the longer a savings window you give yourself, the more likely you’ll be to amass $1 million before your career comes to an end — even if you only earn an average salary.

Imagine you start contributing to a retirement savings plan at the age of 25 and you do so for 40 years. If you put in $350 a month, and your investments in your retirement plan deliver an average annual 8% return, you’ll end up with close to $1.1 million after four decades. (That 8% return is a bit below the stock market’s average and a reasonable one to work with.)

But now watch what happens when you shorten your savings window by 10 years. Suddenly, you’re looking at just $476,000 in total savings by delaying those efforts by a decade.

The more time you give yourself to save for retirement, the more likely you’ll be to grow modest IRA or 401(k) contributions into $1 million or more. If you haven’t yet begun saving for your senior years, start now.

Invest in an S&P 500 fund

Christy Bieber: When you’re investing for retirement, it’s essential to pick the right assets to grow your wealth. Ideally, you should be well-diversified, exposed to an appropriate level of risk, and invested in something you’d be happy to hold for the long term.

That’s why an S&P 500 index fund is an ideal choice. The S&P 500 is a financial index comprised of around 500 of the largest companies in the United States. When you buy an ETF tracking the S&P 500, the money you’ve invested is distributed to purchase very small shares of each of those companies.

Over time, the S&P 500 has consistently produced great returns with very minimal risk. Its returns average around 10% per year, and long-term investors who’ve kept their money invested for a period of at least 20 years have always turned a profit, even if they timed their initial investments poorly.

The S&P 500 is as close to a sure thing as you can get, and the generous returns it provides allows you to build a million-dollar nest egg by setting aside a reasonable amount of money each month as long as you start saving at a reasonable age.

In fact, if you begin investing in an S&P fund when you’re 35 and earn the average 10% annual returns the S&P 500 has consistently produced over time, you’d need to put just $506 per month into your account until age 65 to end up with $1 million. Maxing out your IRA alone each year should be sufficient to hit your goal.

The ease of investing in an S&P fund, along with the favorable return/risk ratio, is one of the key reasons why Warren Buffett — one of the greatest investors of all time — believes this investment is the right one for most people. I’ve bet my own retirement on it, and anyone else who wants the surest chance of becoming a millionaire retiree may want to consider doing the same.

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