Broker Check

If You Could Turn $100 Into $700,000 Would You?

| October 15, 2019

By Kristi De Rycke, Registered Assistant 

What if your employer (or a customer if self-employed) walked up to you and asked “Would you prefer I increase your pay by $100 per month starting now or give you an envelope with $700,000 the day you retire?  What would you do?  This sounds pretty ridiculous.  Doesn’t it?  What if that same person said it would be $100 per month now or $100,000 the day you retire?  What would you choose then? Still sounds like a pretty good deal.  Wait….what would that money be at $100 per month for the amount of time we have left before retirement if handed to us in each paycheck and spent by us when we receive it.  Well let’s see.

Okay so these are the numbers we can use to compare the results below.  The calculations for all tables do not take into account inflation (the fact that $24,000 tomorrow won’t be able to buy as much as it did today). 

Having the choice for a really big paycheck is really not that far-fetched!  I want you to go to any compound interest calculator on the internet and check my math.  I used as I thought it was a pretty reputable site.  Then just to make sure I double checked it on a calculator on  What is compound interest?  It is the magic that makes investing for the future have big results!  So when you buy stocks that pay dividends (not all of them do), they pay you monthly, quarterly or yearly dividends.  Dividends are a portion of the company profits that are given back to you as the investor.  When you invest money in a stock fund (either a mutual fund or ETF), you can set up to have dividends reinvested.  This way when you get a dividend it is automatically put to work to purchase more shares of a stock fund.  The other part of growth on your money is when the price of stocks go up and are worth more when you sell. 

One of the questions is what is the annual growth rate on investments?  The S&P 500 index is a combination of 500 large American companies and often the measure of average return.  This index is often used to compare investment returns.  This would not include any bond portion of a portfolio.  Bonds would have lower compound interest but still an important part of an investment plan.  If you are more comfortable investing the $100 per month in a bond fund you can use the same online calculators, use a lower percentage return and determine what the money would be worth in 20, 30 or 40 years.

Okay so back to the numbers.  There is some disagreement on what is the average annual return for the S&P index. states that it is 9% annually. has it at 9.8% average for the past 90 years. states that the average S&P interested is over 12% from 1923-2016.  So obviously I like Dave Ramsey’s calculations but decided to put the numbers out assuming a hypothetical 7% return, a hypothetical 9% return and hypothetical 11% return to cover the bases.  This assumes contributing the $100 per month with compound interest only figured annually (which is a little more conservative than compounding monthly or quarterly). 

40 year old:  You are probably 20 years or so from retirement.  So what would your $100 per month be if you decided to automatically put it into an S&P fund with the below stated hypothetical returns?  Keep in mind that you may work longer than 20 more years or you may leave the money invested for longer than retirement day so that it would continue to grow.

30 year old:  This is figuring 30 years until retirement but you most likely will be working longer and the money continues to grow until you have to take it out so the numbers could be higher.

20 year old:  Clearly you are starting to see the pattern of how much bigger the numbers get the more the money is invested!  So what would the numbers be for you ambitious young adult???  Wait for it…………..

The money you are earning today is all clearly your money (well what is left of it after taxes).  Do you want the money to be “Now Money” or “Later Money”?  Realize that by using the money as “Now Money” means it will be much smaller than “Later Money”.   Consider sacrificing a little of “Now Money” to give your future-self more options! 

There are many ways to invest this money based on your risk level.  Look into the options that are right for you. 

 “These hypothetical examples are for illustrative purposes only and do not represent the performance of any specific investment. Investing involves risk including the potential loss of principal. Indexes cannot be invested in directly, are unmanaged and do not incur management fees, costs and expenses. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performances is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.”

 By Greg Johnson

Ah the power of compound interest.  It is simply one of the most powerful tools people have to make their dreams come true.  As you can tell by the numbers in Kristi’s story, time and interest are an investors two best friends.  I often times hear people say they wished they would have started saving earlier in life.  You may not have the ability to go back in time, but as you can tell by the numbers, the sooner you start, the better off you will be.  Another factor you want to consider is how hard your money is working for you.  If you have all your money invested in a savings account you won’t have a chance to be anywhere near these dollar amounts.  In fact, if you did the same calculation as a 30 year old above and received 1% on your money you would end up with $41,743 instead of the amounts well over $100,000.  Let your money go to work for you and get started as soon as you can.