Turn Your $100K Salary Into a $2M Retirement Fund

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A six-figure salary is the aspiration of the masses, and if you bring in $100,000 a year, you might feel like you’ve made it — but if your goal is a $2 million retirement fund, you still have a steep hill to climb. 

With that kind of salary, a $2 million nest egg is within reach, but you can blow it by taking wild risks, acting without planning and letting your emotions get in the way of your strategy.  

By following this ambitious but achievable course of action, you’ll avoid costly mistakes on your way to a $2 million nest egg.

Focus On the Fundamentals

The good news is that if you already know the basics, there’s not much more to learn.

“The key to success is to create a long-term plan that includes budgeting, saving, and investing,” said Eric Lee, co-founder of the real estate investment company REI Insiders. “Budgeting is important for ensuring that expenses don’t exceed income and for allocating money for saving and investing. Saving money is essential for providing a financial cushion in case of emergencies and for providing funds for investments. Investing is the best way to grow wealth in the long term and can be done through stocks, bonds, mutual funds, and real estate. Finally, it’s important to stay disciplined and stick to the plan. With careful planning and consistent effort, it is possible to grow wealth with a $100,000 annual salary.”

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Make Professional Help Your First Investment

The best way to turn a small fortune into a big one is to invest in the services of a qualified, experienced and credentialed professional like a certified financial planner, wealth advisor or financial consultant.

“Hire a legitimate financial advisor, not just someone who will sell you life insurance,” said Sharon Sanders, former corporate CFO and co-founder of Philadelphia Weekly. “A legitimate financial advisor can analyze your income streams and risk tolerance and suggest investments that fit your budget and will likely earn you money in the long term. These financial advisors study the investment industry so much that they can predict which market will likely boom and what will likely crash in five years.”

Keep Your Investments Simple and Consistent

As Lee pointed out, the fundamentals for success never change even when the dollar figures grow — there’s no need to start getting fancy now. 

“Individuals earning an annual income of $100,000 can work towards amassing a retirement fund of $2 million by implementing a dollar-cost averaging strategy in the S&P 500 index,” said June Jia, a quantitative researcher at GF Securities and the owner of Canny Trading. “By consistently allocating a predetermined, small percentage of their income to investments in the S&P 500 each month, regardless of market conditions, they can purchase more shares when prices are low and fewer shares when prices are high, which allows them to effectively capitalize on market volatility.”

Are You Retirement Ready?

Jia pointed out that the S&P 500 has averaged annualized returns above 10% over the last 50 years — and a simple, cheap ETF is all you need to ride that wave. 

Take Advantage of Tax-Privileged Accounts

The same S&P 500 ETF held for the same period will produce two very different long-term outcomes in a personal brokerage account vs. a tax-advantaged retirement account. 

“Consider investing in a 401(k) or another tax-advantaged retirement plan,” said Branson Knowles, a former banker at Chase and the current head of U.S. digital banking at Top Mobile Banks. “These accounts provide tax advantages and can hasten the growth of your money.” 

A 401(k) is always the best bet if it has an employer match, which everyone should take full advantage of regardless of income. 

You Can Double-Up on Retirement Accounts

After you meet your company’s match, you might find better options or lower fees in a different kind of retirement fund — and it’s perfectly legal to contribute to a 401(k) and an IRA at the same time.  

“A traditional IRA can assist you in lowering the portion of your income that is subject to taxation and accelerating the growth of your retirement savings,” said Kaloyan Dimitrov, career expert at Enhancv. “In 2023, the maximum amount that can be contributed to a traditional IRA is $6,000. Individuals aged 50 or over are eligible for a catch-up contribution of an additional $1,000.”

Are You Retirement Ready?

Dimitrov noted that just like a 401(k), withdrawals from a traditional IRA in retirement are taxed like regular income — but Roth IRAs are not.

“Contributions to a Roth IRA are deducted from earned income after taxes have been taken out,” said Jonathan Rogers, founder of the financial platform Credexel. “Withdrawals from the account are free of taxation after the account holder reaches retirement age.”

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.
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