Investing $50 a month could add up nicely for your retirement (2024)

FAQs

Investing $50 a month could add up nicely for your retirement? ›

If you invest $50 over 40 years at 10%, you'll end up with around $265,000. That's certainly a nice amount of money. In fact, a recent study by Northwestern Mutual found that the average American has $89,300 saved for retirement.

Investing only $50 a month adds up

Contributing $50 a month to an investment account can help create impressive savings, even at a moderate 5% annual growth. It's a common myth that you need a few thousand dollars to begin investing.

Investing $50 a month over 35 years, with the returns varying around the baseline average of 10% by ±3%, results in the following future values: At a 7% annual return rate (monthly compounded), the future value is approximately $90,052.73. At the baseline rate of 10%, the future value is approximately $189,831.90.

You should consider saving 10 - 15% of your income for retirement. Sound daunting? Don't worry: your employer match, if you have one, counts. If you save 5% of your income and your boss matches another 5%, you've accomplished a 10% savings rate.

Based on the same parameters above, you'd save approximately $327,161 by age 65 if you put away $100 a month with a 3% partial employer match of your salary.

In our example, investing $50 a month over 40 years leaves you with about three times that amount. It's also worth noting that investing $50 a month means parting with $600 a year. Over 40 years, that's $24,000. So based on the number above, you'd be looking at a $241,000 gain.

For simplicity's sake, assume that compounding takes place once a year. After 20 years, you will have paid 20 x 12 x $100 = $24,000 into the fund. However, the compounding return will more than double your investment.

Assuming that you can earn this 10% average return over your investing career, if you are getting started investing this year and you want to become a millionaire in 30 years, you would need to invest $506.60 per month. This amount may seem like a lot, but it may actually be pretty doable for many people.

Making $4,000 a month based on your investments alone is not a small feat. For example, if you have an investment or combination of investments with a 9.5% yield, you would have to invest $500,000 or more potentially. This is a high amount, but could almost guarantee you a $4,000 monthly dividend income.

If you set aside $50 a month for one year, you'll have $600 saved. That's better than $0. As you continue to contribute more money, your account balance will grow. By keeping your extra cash in a high-yield savings account, you can earn interest while your money sits in the bank.

What is a comfortable retirement income? ›

The definition of a comfortable retirement differs from person to person and depends on things like the number of holidays you plan to take each year. However, some experts have suggested you could maintain a comfortable lifestyle with a pension income between half and two thirds of your final working salary.

The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.

If you start saving $500 a month for your retirement fund at the age of 30, you'll still be setting yourself up for greater financial stability when retirement arrives. By stashing away that much each month, you can expect to accumulate around $400,000 by the time you reach 60.

Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100. If you make a monthly investment of $200, your 30-year yield will be close to $400,000.

Investing just $100 a month over a period of years can be a lucrative strategy to grow your wealth over time.

The Bottom Line

Putting aside $25 a month to invest in a savings account, mutual fund, or individual retirement account is a worthwhile venture. However, pay extra attention to make sure profits counteract fees.

Is 50% a Good ROI? ROI of 50% can be considered good, but there are other factors to consider to understand if your investment was a good one.