Can You Retire a Millionaire by Investing Just $10 a Day? The Answer Is Yes--Here's the Math

Millionaires aren't a dime a dozen in the U.S. However, there may be more of them than you think. The number was 23.8 million at the end of 2024, according to a study conducted by Swiss bank UBS (NYSE: UBS).

If you'd like to join their ranks, it's not an impossible dream. Can you retire a millionaire by investing just $10 a day? The answer is an unequivocal "yes."

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An applicable fable

"The Tortoise and the Hare" ranks as one of Aesop's most famous fables. In this fable, Aesop told the story about a race between a slow-moving tortoise and a fast-paced hare. The hare got off to a big head start, but stopped along the way to take a nap.

Meanwhile, the tortoise plodded along without any diversions. The hare eventually woke up, only to find that the tortoise had already crossed the finish line.

There's an obvious lesson from this fable: Slow and steady wins the race. This lesson is applicable to investing today.

The most important advantages you have in becoming a millionaire are time and discipline – the two keys to success for the tortoise in Aesop's fable. The longer your investing time horizon, the more money you'll likely make. The more disciplined you are in following a buy-and-hold strategy, the greater your chances of amassing a $1 million fortune will be.

The Warren Buffett way

You don't have to find the perfect growth stocks or cryptocurrencies that skyrocket practically overnight to become a millionaire retiree. Warren Buffett described a better way in his 2013 letter to Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) shareholders.

Buffett wrote that the typical investor doesn't need to pick stocks. He advised that a better strategy is "to own a cross-section of businesses that in aggregate are bound to do well." The legendary investor added, "A low-cost S&P 500 (SNPINDEX: ^GSPC) index fund will achieve this goal." He even suggested Vanguard's funds.

Could following Buffett's approach really enable you to become a millionaire in retirement? History shows that it's possible.

The average annual total return of the S&P 500 is roughly 10%, including reinvested dividends. Let's suppose you invested $10 each business day in the Vanguard S&P 500 ETF (NYSEMKT: VOO). At 250 days per year, that comes to $2,500 annually. Assuming you obtained the historical average return of 10%, you'd have slightly over $1 million after 38 years.

Granted, 38 years is a considerable amount of time. However, a person who begins investing in their 20s at the beginning of their career and retires at their Social Security full retirement age of 67 would have an investing time horizon of more than 38 years.

Two important considerations

Keep in mind, though, two important considerations that can affect how much money you'll have in retirement: inflation and taxes.

Inflation erodes the buying power of money. A nest egg of $1 million 38 years from now won't be worth as much as $1 million today.

How can you offset the impact of inflation? The simplest way is to either invest more over time. Another alternative is to invest for a longer period. That might not be as easy if you're already planning to invest for almost four decades. The other option is to achieve a higher return, but beating an average annual return of 10% might not be easy over the long run.

Taxes present a more manageable challenge to address. Investing in tax-advantaged accounts such as IRAs and 401(K) plans can help you grow your money tax-free. Many employers also offer matches for contributions you make to a 401(k), so saving that $10 per day could be even easier.

Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.