How much to invest today for $1.5 million retirement

Investing in the stock market can be a great way to build wealth and save for retirement. But how much do you need to retire comfortably? And how much should you invest today to hit that number in 25 years?

If you can combine low expectations with a very long time horizon, you'll probably make a fortune investing in stocks.

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A goal of having $1 million in savings by retirement might have seemed achievable just five years ago. However, with inflation giving many investors a reality check, it’s clear that this may no longer be enough.

RISK MANAGEMENT WITH STOCKS
* Maintain 6 months of savings
* Invest only your 5-year+ money
* No position > 20% of the portfolio
* Diversify across sectors
* Add money as often as you can

Then simulate a 40% decline for the portfolio and see how you feel.

What else?

— The Motley Fool (@themotleyfool) January 13, 2025

A 2024 survey from Northwestern Mutual found that Americans estimate they’ll need around $1.46 million to retire “comfortably.” That’s up from $951,000 in 2020. Assuming inflation remains under control, the jump may not be as significant in the future. But for argument’s sake, let’s round up and say $1.5 million is the number to aim for.

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To determine how much you should aim to have invested today, it’s important to consider your expected annual return over the long haul. Let’s assume a more modest annual growth rate of 8%, which will account for potential slowdowns in the future. A good exchange-traded fund (ETF) to invest in that mirrors the S&P 500 is the SPDR S&P 500 ETF Trust (NYSEMKT: SPY).

Investing for comfortable retirement goals

It tracks the broad index, giving you exposure to 500 of the largest and safest stocks on the market, allowing for diversification and simplifying investment choices. If you have 25 years to retirement, you’ll need to invest around $219,000 today, based on an 8% annual growth rate. The further out you are from retirement, the lower the required investment will be due to compounded returns over time. If you don’t have as much saved up as the projection shows, it doesn’t mean you won’t hit your retirement goals. The table simply serves as a guide. Should the S&P 500 average better than 8% returns, the investment needed today will be less. You can also steadily add to your investment over time. Regardless of how much you have saved or can afford to invest, putting whatever money you can into a diversified fund that tracks the S&P 500 can help ensure you’re in a stronger financial position by retirement. Setting realistic expectations and investing consistently are key to achieving your retirement goals. While $1.5 million may seem daunting, strategically investing in low-risk, diversified funds like those tracking the S&P 500 can make the goal more attainable. Consider starting your journey today and continually add to your investment to stay on track for a comfortable retirement in 25 years.