4 Ways to Grow $100,000 Into $1 Million in Retirement Savings

Anyone can build a million-dollar retirement portfolio. Here are four ways you could practically grow $100,000 to $1 million.

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Turning a modest $100,000 into a comfortable $1 million retirement nest egg might seem like a distant ambitious dream. But with strategic planning and consistent effort, it’s an achievable goal. Depending on your time horizon and risk appetite, four effective strategies could help you grow your $100,000 savings into a $1 million retirement fund.

Indeed, $100,000 is a significant capital sum with which to strategically build a million-dollar retirement fund over time. Here’s how you can achieve the noble dream.

Entrepreneurship: Start a business, grow that side hustle

The fastest way for young investors to grow $100,000 into a million dollars (or billions) is through owning a business – especially a profitable one. The internet is awash with success stories of people whose side hustles more than replaced their ordinary employment income and became million-dollar businesses over time.

Depending on the business’ design, initial capital investments could range from as little as $100 for internet-based hustles to several thousand. Once the business starts generating enough cash flow to sustain itself, it can pay dividends, pay you allowances and salaries, and may organically fund growth projects.

A successful startup could pay its founder more than a million dollars annually after five short years.

Alternatively, you can sell the business to a strategic investor for multiples of its earnings before interest, taxes, depreciation, and amortization (EBITDA). Yes, you can flip the new business for a million dollars or more, before it even becomes technically profitable. Its future earnings potential could be good enough.

One Canadian inspiration, Shopify (TSX:SHOP) co-founder Tobias Lütke and friends, developed and launched an ecommerce solution to help run their online shop in 2006. The commercialized “hustle” later graced the TSX in 2015. How much does he have today? The Shopify co-founder directly holds 11,619,770 shares and indirectly controls 67,298,750 shares in Shopify stock. Combined, the two positions are worth nearly $8.2 billion today.

Beware the risks! Starting a new business could be time-consuming, and extremely stressful. You could lose all your capital if the startup fails, and more than 50% of startups usually fail within their first five years.

Invest $100,000 in growth stocks

Entrepreneurship isn’t for everyone. However, you could use your $100,000 to buy ownership stakes in great Canadian businesses through the stock market. Investing in growth stocks could set you well on a path to a $1 million retirement account.

If you had invested $100,000 in former venture capitalist Mark Leonard’s Constellation Software (TSX:CSU) stock 10 years ago, you could have $1.5 million in your account today, or nearly $1.7 million if you fully reinvested its dividends.

Investing in growing companies with tangible moats could be a winning ticket to a million-dollar retirement fund. Despite its recent volatility in 2022, Shopify stock has delivered 3,200% in capital gains since going public. A $100,000 investment in SHOP stock at its IPO in 2015 could have grown to over $3.2 million today.

You would still need to have a high tolerance for risk, though. Growth stocks are more volatile than the broader stock market. It’s advisable to diversify your holdings across several names. Joining an investing service could significantly help with great and diversified ideas.

That said, listed companies have lower business risk profiles than startups.

Religiously add more capital

Conservative investors can grow a million-dollar portfolio too, with time. You should commit to regularly adding more capital into your retirement fund to grow your capital. A $100,000 investment could require 30 years to grow to a million dollars at a conservative 8% annual return on a cheap index exchange traded fund (ETF). However, regular additions of $10,000 each year could reduce the period to just over 20 years, as the table below shows.

How to grow $100,000 into $1,000,000 on the stock market

Make maximum use of tax-advantaged accounts like the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Accounts (RRSP). They may reduce the tax drag on your investments – accelerating your goal to a one-million-dollar nest egg.

Consistently reinvest cash flows

Keep reinvesting the cash flows you receive on your investments. These include payouts from dividend stocks and interest on bond positions.

A $100,000 investment in Canadian National Railway (TSX:CNR) 20 years ago could have grown to nearly $1.4 million through capital gains. However, diligently reinvesting CNR stock dividends could have accelerated portfolio growth to almost $1.9 million.

You should stay invested and keep reinvesting, and the $1 million target could be attainable soon enough, regardless of which investing strategy you comfortably employ.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Paradza has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Canadian National Railway and Constellation Software. The Motley Fool has a disclosure policy.

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