Could Investing $50,000 Into S&P 500 Index Funds Be Enough to Get Your Portfolio to $1 Million by Retirement?

The old adage that you need money to make money is true, as the benefits of compounding are greater when an investment balance is large. Consider that the S&P 500 (SNPINDEX: ^GSPC) has averaged an annual return of 10% for decades. That means an investment might, on average, double after just over seven years. But if someone were to invest $1,000, the gain would be much more modest than if they invested $10,000 or $50,000.

That's why there's a strong incentive to invest a large lump sum for those who can afford to do so. Below, I'll look at whether a $50,000 investment in S&P 500 index funds today could grow to $1 million or more by retirement.

The S&P 500 has generated strong returns, but they may be a bit more modest in the future

Estimating how large an investment in the S&P 500 might grow to be in the long run is no easy task, since it depends on assumptions about its future growth rate. What complicates matters is that the S&P 500 index has been performing well above average in recent years, and thus, it may be overdue for a slowdown. That means investing today could result in below-average returns in the future.

While the index has averaged returns of around 10% for decades, there have been periods when it's been far below that. Investing in an index fund that tracks the S&P 500 today might still be a good move, but investors may need to brace for lighter annual returns of around 9% or perhaps even 8%.

^SPX data by YCharts

Here's how large a $50,000 investment might grow to be over the long run

Rather than picking a specific growth rate, I've created a table below showing what a $50,000 investment would grow to at varying rates over a very long time frame. It also demonstrates just how significant even a 1% change in the annual return can be for an investment in the long run.

Year	8% Return	9% Return	10% Return
5	$73,466	$76,931	$80,526
10	$107,946	$118,368	$129,687
15	$158,608	$182,124	$208,862
20	$233,048	$280,221	$336,375
25	$342,424	$431,154	$541,735
30	$503,133	$663,384	$872,470
35	$739,267	$1,020,698	$1,405,122
40	$1,086,226	$1,570,471	$2,262,963

Table and calculations by author.

A $50,000 investment in an index fund tracking the S&P 500 can indeed grow to $1 million, but whether it gets there by retirement will depend on what the average annual return will end up being and how many years a person still has until retirement.

However, even for investors who may be worried about a slowdown ahead, it can still make a lot of sense to invest in a top index fund, as it remains a relatively low-risk way to invest in the stock market.

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