Is Reaching Your First $100,000 Really the Hardest Milestone?

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Are you on track to meet your long-term investment goals? It's not always clear. That's particularly true for younger people who are just getting started and have more time ahead of them than behind them. You typically earn more as you age, and your invested savings will also grow in the meantime. But, how much more will you be able to save in the future, and what sort of returns will you actually achieve on your savings? Nobody truly knows.

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Still, there are some basic age-based savings milestones that will help you figure out how you're doing (including compared to your peers), or if you need to do more.

To this end, a recently posted Reddit question is one that many young investors are probably regularly asking themselves.

How long does it too you to reach your first 100k?
byu/mutedvermicelli1019 inFire

In answer to the question, if you've been tucking a good bit of money away for a while now and it still feels like you're miles away from even the relatively small sum of $100,000, you're not doing anything wrong. Yes, your first $100,000 really is the toughest retirement saving milestone to reach.

Now here are a couple of other important takeaways on the matter: (1) You're probably setting the stage for more future growth than you realize, and (2) you also could be -- and arguably should be -- doing more to grow your nest egg.

It's (probably) going to be alright

There's much to be said of the psychological upside of getting to a big round savings number. It feels like you've proven a point, even if only to yourself. Once you reach your first $100,000, getting to the next big mental/financial milestone feels considerably more attainable. That means you're well motivated to aim for that goal, knowing you can reach that one, too.

But getting to that first one... ugh. It's just so slow.

Don't get discouraged if it's so slow-going that you feel like giving up though. Here are three reasons why.

1. You're probably not making as much income now as you will be later on in life

Data from the U.S. Census Bureau confirms it -- middle-aged workers really are earning more money than relative newcomers to the workforce. In 2023, for perspective, people between the ages of 45 and 54 were earning median income of $61,190 per year, versus only $50,160 for 25- to 34-year-olds. On a whole household basis, those median numbers are $110,700 and $85,780, respectively. And, while certainly some older people are still paying on their student loans, it's far more likely that more younger adults are paying far more on these loans than their older counterparts.

In an environment that's already riddled with inflation, there's just not much extra money left over to put toward retirement. That extra is coming though. Just be patient.

2. The small amounts now will become (much) bigger amounts later

Even so, don't choose to save nothing now just because the amounts you can commit to the effort are seemingly too small to matter. They do.

For perspective, assuming you achieve the market's long-term annual average return of 10%, every $1 you save today will be worth roughly $2.60 10 years from now, when reinvested. In 20 years it should be worth around $6.73. And, if you invest this $1 in the stock market and reinvest its growth for a full 30 years, it should then be worth roughly $17.45. And to be clear, that's without any additional contributions being made in the meantime.

Image source: Getty Images.

What gives? It's simple. Eventually, the annual returns on your retirement savings are greater than any yearly amount of your work-based wages you could put toward the effort. It just doesn't start happening in earnest until about two-thirds of the way through the 30-year span. Then the fireworks finally start. The trick is simply saving and investing every dollar you can as early as you can.

3. Yes, there's always more you can do in the meantime

With all of that being said, don't do less now just because the bulk of the rewards materialize later. The scope of your future rewards directly correlates to the nickels and dimes you free up in the present to let time do its work with.

Here's a rundown of the top things anyone can do (but many don't) to set themselves up to get to their first $100,000 faster, setting the stage for a bigger retirement nest egg in the distant future:

• Automate your savings: When and where possible, deduct a portion of your paycheck directly into a 401(k) plan. You'll typically not miss money you never had in your bank account to begin with. You'll adapt your spending accordingly, continuing to save money for retirement when it might otherwise be uncomfortable to do so. Also consider automating transfers from a bank account to a brokerage account or retirement account other than an employer-sponsored one, if you want to go above and beyond.
• Take an honest look at your spending: Plenty of people say -- and even believe -- they have a monthly budget. In reality, they don't. They're often shocked to learn how much they spend in total on restaurant dinners, entertainment, subscriptions, clothing, and credit card interest. Even culling just $200 per month in needless spending is $2,400 worth of investable saved money per year. Saving and investing that amount annually for just 20 years would leave you with more than $150,000 at the end of that two-decade stretch.
• Get that side hustle going: Nobody really wants to work a part-time job in addition to their full-time work. But, if you want a better-than-average retirement, you'll need to do more than the average person does. The typical side hustle produces between a few hundred and several hundred extra bucks' worth of income per month, for the record. For most people, that's certainly enough to make it worth the time and effort.

The right number

But you still need a typical number for your age, or an age for your number? Most of the Reddit community reports reaching their first $100,000 sometime during the first half of their 30s.

That jibes with recommendations from mutual fund companies T. Rowe Price and Fidelity as well as brokerage firm Charles Schwab, by the way, each of which say you should have between half to one whole year's salary tucked away for retirement by the time you turn 30 if you want to maintain your standard of living in retirement. That stash should double by the time you're 35, to between 1 and 2 times your annual salary. Obviously that's a pivotal five-year stretch for most people, when incomes really start to grow, debt starts to shrink, and you start earning at least a measurable return on the money you've already saved up.

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Charles Schwab is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends T. Rowe Price Group. The Motley Fool recommends Charles Schwab and recommends the following options: short June 2025 $85 calls on Charles Schwab. The Motley Fool has a disclosure policy.