Becoming a millionaire retiree is the dream of many Americans, and with good reason. Who doesn't want the financial security that a seven-figure nest egg can provide? But figuring out a way to actually amass so much money can present challenges.
The good news is there are tried-and-true techniques for achieving millionaire status before leaving the working world. Here are three bright investment ideas from Motley Fool retirement experts that could help you achieve this milestone.
Invest in an S&P 500 index fund
Christy Bieber: Putting your money into an S&P 500 index fund is one of the simplest, easiest, and least risky ways to end up a millionaire.
That's because this fund tracks the performance of around 500 large, well-established U.S. companies including Apple, Amazon, Tesla, Johnson & Johnson, and Pfizer. An S&P 500 index fund offers instant diversification, as your money is invested in a mix of 500 major companies across different industries. The S&P 500 also has a proven track record, earning 10% average annual returns since 1957 (with dividends reinvested).
If you put enough money into an S&P 500 index fund and leave it invested for long enough, becoming a millionaire is inevitable. The only question is how much you'll need to invest. And the answer depends how old you are when you begin.
If you want to reach millionaire status by 65 and you start at 25, you'd need to invest only around $134 per month in an S&P fund to hit your goal. But if you start at 45, the amount you'd need to invest would be much higher, at around $1,455 per month.
If you want a seven-figure nest egg, start saving ASAP and use the calculators on Investor.gov to discover exactly how much you need to put into an S&P fund monthly to achieve your millionaire retirement goal.
Put money into real estate
Maurie Backman: Many investors enjoy success by loading up on stocks and holding them for many years. But it's important to assemble a diverse mix of assets if your goal is to retire a millionaire. And so it pays to add real estate into your personal mix.
You can do so in a number of ways. First, you could go out and acquire actual properties. Homes have a tendency to gain value over time. If you buy a property you rent out for many years, your tenants can pay your mortgage during that time. Then, once your home appreciates in value, you can sell it at a profit, thereby securing more retirement wealth.
Another way to invest in real estate is to buy REITs, or real estate investment trusts. This is a good option if you don't want to take on the risk or legwork of owning physical property.
REITs are companies that derive revenue from real estate holdings. The great thing about REITs is that their value doesn't always correlate directly to stock values, which can lend to more diversification in your portfolio. Just as it's a good idea to buy stocks you can hold for the long haul, so too should your goal be to buy REITs you can hold for many years.
Of course, you don't have to choose between physical properties and REITs. If you're looking to secure yourself a millionaire retirement, your best bet may be to dabble in both.
Contribute to a 401(k) or IRA
Katie Brockman: You don't need to be an experienced investor to retire a millionaire. In fact, for many workers, the easiest way to invest for retirement is to contribute to a 401(k) or IRA.
When you invest in a retirement account such as a 401(k) or IRA, you're generally investing in mutual funds or index funds. This means you don't need to worry about choosing individual stocks or keeping an eye on how the market is performing — all you need to do is contribute consistently, and your money will grow over time.
Most plans allow you to set up automatic contributions, which can make it easier to stay on track. If you have access to a 401(k), you may be able to transfer a portion of each paycheck directly to your retirement fund. With an IRA, you can set up automatic transfers from your bank account to your retirement fund on the schedule you choose.
Consistency is key to retiring a millionaire, and by investing just a little each month, you can accumulate more than you may think over time. With automatic contributions, you can set your savings on autopilot, making it easier to reach your retirement goals.
Investing through a 401(k) or IRA may not be right for everyone, particularly investors who prefer buying individual stocks or want total control over their portfolios. But contributing to a retirement account is one of the most effortless ways to invest, and with enough time and consistency, it's possible to retire a millionaire.
The $16,728 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Christy Bieber has no position in any of the stocks mentioned. Katie Brockman has no position in any of the stocks mentioned. Maurie Backman owns Amazon, Apple, and Johnson & Johnson. The Motley Fool owns and recommends Amazon, Apple, and Tesla. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.