Want to get your portfolio to $1 million by retirement? Here’s how much you should invest each month

If you don’t have tens of thousands of dollars to invest in the market, you shouldn’t be discouraged, even if you plan to retire. While having a large lump sum to invest right now would be great, you can also add to your investment over time to help grow your portfolio. An ideal situation might be where you invest the same amount of money each month in an exchange-traded fund (ETF).

Below, I’ll show you how you can grow your portfolio to $1 million by retirement, depending on the number of years you have left until retirement and different annual growth rates.

Invest in this ETF to simplify your strategy

The biggest obstacle to growing your savings over the years is being lured hot growth opportunities and investments that are much riskier than they might appear to be. While there are many thematic ETFs that can give you exposure to crypto, cannabis, AI, and many other growth stocks, the safest and best approach may just be to try to mirror the markets. It may be a more boring option, but it can be an effective way to grow your portfolio without taking significant risks.

The ideal fund for this purpose is SPDR S&P 500 ETF Trust (SPY 0.95%). Because the fund is watching S&P 500 index, you will gain exposure to the best stocks in the market. Instead of picking stocks or searching for the best stocks to own, you can just add to your position in this fund, knowing that your investment will continue to grow over the long term. And with an expense ratio of 0.09%, it’s a fairly low-cost ETF that won’t hurt your overall return much.

Over the long term, the S&P 500 has averaged a return of about 9.7%. But the growth rate can and probably will deviate from this. The good news, though, is that by mirroring the market, you’ll put yourself in a good position to accumulate wealth over the years, regardless of the actual growth rate.

How much would you have to invest each month to reach $1 million?

There are three key variables to consider when determining what your long-term portfolio balance will be: how much you invest, how many years you have left to invest, and your average annual return. In this example, I will use different growth rates and years remaining to determine what the monthly payment should be based on those factors.

Calculations by author.

It’s impossible to know what the future growth rate of this ETF or any other ETF will be, but at least by considering how much you’d like to invest per month, you can set realistic expectations. By starting earlier in life and having more years to invest, you have the advantage of time on your side and the monthly payments are much lower than when you are older. But later in life, you may have even more income that you can put aside to invest.

Ultimately, you should try to find an amount that is manageable and sustainable, even though it may seem low.

Regular investment can help you stay on track to reach your goal

Regardless of how much you think you might need to invest, the important thing is to try to keep the habit of putting money away every month. Investing a large amount every month is not as important as making sure you still try to invest as much as you can. And if you have the opportunity to invest a large lump sum, such as a tax return, it can make up for months when you didn’t invest as much as you planned or hoped.