I've saved almost $100,000 for retirement by age 28 using a stress-free strategy to turn everyday investors into millionaires (2024)

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• My investment balance went from $0 to nearly $100,000 in less than five years.
• I followed a strategy many investors use to become millionaires: Buy and hold low-cost index funds.
• By investing in a 401(k) and an IRA, I get decades of tax-deferred and tax-free growth on my returns.

A few months ago during a routine checkup on all of my financial accounts, I was amazed to find that my investment balance had grown by about $30,000 in just six months. The stock market was obviously on a tear, but it was hard to believe I'd made that much progress while the chaos of the pandemic wore on.

Between my 401(k) and Roth IRA, I should reach a $100,000 balance for the first time in August, several months shy of my 29th birthday. That's a pretty thrilling milestone for me because it shows that my diligence is paying off. If I keep it up, I could have well over $3 million earmarked for retirement by the time I'm 65.

I started investing less than five years ago with a simple strategy — invest in index funds through tax-advantaged retirement accounts — and hitting a six-figure balance is all the motivation I need to keep going.

How everyday investors become millionaires

There are seemingly endless books, blog posts, articles, podcasts, surveys, and interviews dissecting the path people have taken to build a net worth of $1 million or more. To me, there's one unmissable takeaway from all these stories: It's virtually unheard of to become a millionaire without investing in the stock market.

But instead of trying to time the market through day trading and risky bets, the most successful investors tend to be the ones who maintain a diversified portfolio over a long period of time — as in, decades. Many take a page out of Warren Buffett's playbook and buy low-cost index funds to match the market's returns and keep expenses down. As Buffett says, "By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals."

Successful investors also know which accounts to use to maximize those investment returns. That means contributing as much money as possible to tax beneficial accounts like solo and employer-sponsored 401(k)s; Roth, traditional, and SEP IRAs; and Health Savings Accounts (HSAs). When you can defer taxes — or in the case of HSAs, avoid them completely — on your investment returns, you experience exponential growth that can't be replicated elsewhere.

I've been setting aside between 10% and 20% of every paycheck before taxes for the last five years, plus I get a generous 401(k) match from my employer. All that money goes into a portfolio of index funds in my 401(k), where it's growing tax-free until I retire. I'm invested in stock index funds, bond index funds, and even real estate index funds. And like many millionaire investors, I don't make changes to my holdings more than once or twice a year — and never on a whim or because of a market downturn.

A couple of years ago I opened a Roth IRA to start growing a separate pot of after-tax money for retirement, and I also invest in index funds there. I make periodic lump-sum contributions to this account, which has a smaller annual limit than the 401(k) of $6,000. I can withdraw my contributions to this account at any time, tax and penalty free, making it a good place to draw income if I decide to retire early.

The funny thing about investing, though, is that returns are fickle in the short term. There's no predicting how the market will perform over the next month or year. My investment balance could dip thousands of dollars below $100,000 in a matter of days, before leveling out and posting a gain in the long term.

But seeing the growth before my eyes is reassurance that my strategy is working. Right now it's less about the exact balance in my account on any given day and more about the momentum that's pushing me steadily forward.