No Savings? Here's How You Can Still Get to $1 Million by Retirement

Key Points

• Investing on a monthly basis can help make up for not having a big lump sum to invest right away.

• The market has averaged a 10% return over the long term, and that can translate into significant long-term gains.

• The $23,760 Social Security bonus most retirees completely overlook ›

Saving for retirement can be an intimidating project to undertake, especially if you don't have any savings to start with right now. But the benefit of long-term investing is that you have time on your side. You can slowly build up your position over the years, and with the help of compounding, you can still be on your way to potentially retiring with a $1 million portfolio, even with no savings today.

You'll need at least 30 years to make this strategy work without having to take on a lot of risk. But if you have that much time and you can afford to begin saving and investing right now, here's how you can put yourself on track to building up a portfolio worth at least $1 million in the future.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Image source: Getty Images.

Invest in a top growth fund every month

The best way to ensure that you regularly add funds to your portfolio over the long term may be to make saving and investing part of your monthly budgeting process, Nowadays, with commission fees being minimal and in some cases even close to zero, investing on a more regular basis can make a lot of sense; there's no need to wait until you've built up thousands of dollars before getting started. Plus, by making the threshold smaller, you eliminate a potential excuse for not investing.

A great place to invest is an exchange-traded fund (ETF) that's focused on long-term growth, and that has solid blue chip stocks in its portfolio.

The Invesco QQQ Trust (NASDAQ: QQQ) fits these criteria well. It gives you a position in the top 100 nonfinancial stocks on the Nasdaq exchange, also known as the Nasdaq-100 index. It will rebalance over time to ensure that you're always getting exposure to the best growth stocks in the world. And it can generate better returns than an index fund that tracks the S&P 500. Over the past five years, the S&P 500 has doubled in value, but the Invesco QQQ's returns are up around 120% (as of Oct. 3).

The difference in returns become even more pronounced over the previous 10-year period, with the Invesco QQQ's returns notably stronger, reaching 480% at a 19.2% annual rate, overshadowing the S&P 500's 244% return, which had an annual rate of 13.2%.

How the ETF can get you to $1 million

To reach a goal of $1 million by investing in this ETF, you'll need to make monthly investments of $300. That can seem like a significant amount, but if you're able to do it, the payoff can be large. The table below shows how a $300-per-month investment can grow after 30 or more years, assuming it rises by a rate of 10% per year, which is approximately what the S&P 500 has averaged for decades.

Data source: Calculations by author.

It could take around 34 years of making monthly investments of $300 before you end up with a balance of $1 million. But remember that this is based on an average annual growth rate of 10%, which is likely to fluctuate. If the long-term average returns turn out to be higher than that, which may be possible if you focus on growth stocks, then it won't take as long to get there. But on the flip side, if the market crashes or faces a prolonged downturn and the average growth rate is less than 10%, then it could very well take you longer to reach $1 million.

However, by investing in a top ETF such as the Invesco QQQ Trust, you'll still likely end up in a far stronger financial position. And that's why investing every month into that -- or other top growth ETFs -- can be a great habit to start today, even if you currently have no savings.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.