There are two approaches you could take. The first is increasing the amount you invest monthly. Bumping up your monthly contributions to $200 would put you over the $1 million mark. The other option would be to try to exceed a 7% annual return with your investments.
If you take your $100,000 and put it in an S&P 500 index fund, you could end up with over $1 million within 24 years if the index produces returns in line with its historical average. If you keep saving, you can get there even faster.
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.
When you're investing a large amount of money in a CD, a high yield can earn you thousands of dollars more than a low one. If you were to deposit $100,000 into a one-year CD that pays a competitive APY of 5 percent, you'd have around $5,000 in interest when the term is up, for a total balance of $105,000.
Middle class is defined as income that is two-thirds to double the national median income, or $47,189 and $141,568. By that definition, $100,000 is considered middle class. Keep in mind that those figures are for the nation. Each state has a different range of numbers to be considered middle class.
The classic approach to doubling your money is investing in a diversified portfolio of stocks and bonds, which is likely the best option for most investors. Investing to double your money can be done safely over several years, but there's a greater risk of losing most or all your money when you're impatient.
The timeline for achieving this goal depends on your returns. For example, a 10% average annual rate of return could transform $100,000 into $1 million in approximately 25 years, while an 8% return might require around 30 years.
The easiest way to make your first million is through compounding interest. The earlier you start saving money, the more interest you earn—and each interest payment increases your balance for future interest calculations.
An investor with $100,000 can potentially expect anywhere from $1,500 to as much as $12,000 a year on average from passive investments that will require little or no effort to oversee.
According to the U.S. Census Bureau, the median household income in 2022 was $74,580. To reach the upper class in 2024, you'd typically need an income exceeding $153,000 – more than double the national median. Don't Miss: Are you rich?
There's no one-size-fits-all number in your bank or investment account that means you've achieved this stability, but $100,000 is a good amount to aim for. For most people, it's not anywhere near enough to retire on, but accumulating that much cash is usually a sign that something's going right with your finances.
A $100,000 salary is considered good in most parts of the country, and can cover typical expenses, pay down debt, build savings, and allow for entertainment and hobbies. According to the U.S. Census, only 15.3% of American households make more than $100,000 annually.
Example 1: $100,000 at 4.25%
At a 4.25% annual interest rate, your $100,000 deposit would earn a total of $4,250 in interest over the course of a year if interest compounds annually. Annual total: $104,250.
If you're a long way out from retirement, a CD probably isn't your best savings option. Retirement accounts like 401(k)s and IRAs offer tax advantages and potentially higher returns in the long run. Early withdrawal penalties can minimize returns.
The U.S. stock market is considered to offer the highest investment returns over time. Higher returns come with higher risk. Stock prices are typically more volatile than bond prices.
It's never too late to save. Starting your savings journey at age 50 doesn't mean it's impossible to be a millionaire by 65. It may be more difficult and restrictive, but if this is your goal, it's crucial that you stick with it. To become a millionaire by age 65, you'd need to save $3,000 each month.
Invest in CDs and Money Market Funds
Many wealthy individuals took advantage of this by saving and investing a portion of their income regularly and buying money market funds and CDs,” Zhong noted. “Since interest rates have remained high in 2024, this strategy will continue to be a favorite of the wealthy.”