How to Turn $100,000 Into $1 Million for Retirement: 3 Smart Investment Strategies

Hitting your first $100,000 in your retirement portfolio is a big deal. It's a nice round number and a significant milestone because it's around the point where you will start to really notice how compound growth impacts your results. You may even begin seeing your portfolio's value increase more from growth than from new contributions.

But once you've cleared that level, it's time to raise the bar. According to a survey by the Federal Reserve, in 2022, the median U.S. retiree between 65 and 74 only had about $200,000 in their retirement nest egg. Even recognizing that many of the people in that age range would already have been drawing down on their accounts for a while, that isn't nearly enough to get a person through retirement comfortably in today's economy.

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 »

So, how do you turn that $100,000 into, say, $1 million by retirement? Fortunately, there are multiple paths to the same destination.

Here are three investment strategies that, combined with continued contributions, can turn that $100,000 into a million-dollar nest egg you can retire comfortably with.

Image source: Getty Images.

1. Put it in an index fund and chill

The most straightforward investment strategy is to invest in the broader stock market via index funds. It's a myth that you need to be hands-on with your investments to do well. The reality is that most Wall Street professionals' actively managed funds fail to outperform the S&P 500, an index of 500 of the largest U.S. companies, over time.

Most investors will want to start with an S&P 500 index fund such as the Vanguard S&P 500 ETF. Then, you can complement it, depending on what you are comfortable with. There are mutual and exchange-traded funds that track virtually every notable market index, including those in non-U.S. markets.

Investors can use such funds to quickly and easily build a diversified portfolio, automate regular contributions, and put their financial future on autopilot. As they say, out of sight, out of mind.

2. Ride the roller coaster of growth stocks

Depending on their age, financial circumstances, and risk tolerance, some people may want to get a bit more aggressive with their investment strategies.

That's where growth stocks can help. These companies, often involved in technology, usually have more upside potential, but investing in them comes with increased risk and volatility. Take Nvidia and Amazon, for example. Both of their stocks have experienced stomach-churning declines at times over the years, but ultimately, each one produced returns that would have transformed modest investments into life-changing wealth for long-term investors.

AMZN data by YCharts.

Not every investment in a growth stock works out that well, and for every big winner, there are several that never recover from catastrophic declines. But if you diversify, it may only take a few home runs over your lifetime to carry your portfolio. But buying individual growth stocks is a high-risk, high-potential-reward strategy best suited for those who are comfortable with such a wide range of outcomes.

3. Set up a DRIP and let it rip

To be clear, you don't need to swing for home runs to retire rich.

Companies often begin paying dividends to shareholders once their business matures and is generating more profits than it can usefully reinvest in itself. Dividends are cash expenses for a company, so it's a good sign when one continues to raise its payouts each year.

Some world-class companies can increase their dividends for decades. There is even a group of stocks, known as the Dividend Kings, that have achieved dividend-hiking streaks of 50 years or more. These companies are as close to timeless businesses as you'll find.

Just check out the difference dividends have made for the long-term shareholders of a company like Coca-Cola, which has raised its payouts for 63 years and counting. (The total return metric below assumes that an investor reinvested all their dividends over the years -- a strong strategy to follow prior to retirement, after which you're more likely to use those payouts to cover your expenses.)

KO data by YCharts

Want to grow your retirement savings? Build a portfolio of stocks with proven histories of dividend growth, and set up a dividend reinvestment plan, or DRIP. As your stocks pay dividends, the company managing your portfolio will automatically use those funds to buy more shares of those companies -- shares that will add to your future dividend payouts.

Over time, that dividend stream will grow like a snowball rolling downhill.

Up for a bonus tip? Consider incorporating all three strategies

As you can see, each of these strategies has merit. But who says you can't utilize all three?

Consider building a foundation in index funds so most of your retirement portfolio grows on autopilot, along with the broader market. Then, sprinkle in some growth and dividend stocks for some additional upside and dividend income.

The cool part is you can adjust practically any part of your portfolio within these simple strategies as you see fit. Investing genuinely is a personal journey, and no two people's paths will be the same. But if you make a solid plan and stick to it, time and regular additional contributions to your retirement account should take care of things in the long run.

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" »

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.