If You Put $300 in Your IRA Every Month for 20 Years, You Could Have This Much Cash by Retirement

Do you feel like you can’t save enough money for retirement for it to matter? Don’t fall into this trap! It often requires sacrifice and dedication to build a comfortable nest egg. And those who already have one usually grew their portfolio by taking small, steady steps. They may have started out with surprisingly modest sums of money too.

So, what would a $300 monthly purchase of an S&P 500 index fund in a tax-deferred IRA be worth 20 years in the future? More than you might think.

Slow and steady wins the race

We must make one key assumption in this hypothetical scenario — the S&P 500 will continue generating an average annual return of about 10%. Bear in mind the index’s performance in any given year can vary widely, including losses about one out of every three years.

Based on that long-term average, however, investing $300 per month in the S&P 500 should leave you with roughly $227,000 after two decades.

There’s an important footnote to add here: Assuming this money is in a traditional IRA rather than a Roth IRA, it will be taxed as as you withdraw from it. Fortunately, you don’t have to take it all out at once, and whatever remains in the account will also continue to grow tax-free.

Start with whatever you can afford

At today’s interest rates, a $227,000 nest egg will produce about $9,000 of annual interest payments. That’s not bad, but it’s not enough for most people to live on in retirement.

With that in mind, you should aim to increase your regular contributions as time goes on or start as early as possible to give yourself more than 20 years to build your nest egg. Taking the first step in your retirement planning is often the most important thing you can do.