The first $100,000.

The hardest but the most impactful.

There is a lot of talk these days about how $100,000 is not that much money, but I assure you, $100,000 in savings, retirement accounts, as cash, in brokerage accounts, or a combination of all is still a large amount of money.

As of 2023, according to Yahoo Finance, roughly 14% of Americans had $100,000 or more saved for retirement with 78% having $50,000 or less saved for retirement.

If $100,000 were a small amount of money, I think we could expect at least 50% of Americans to have that amount of wealth.

A few weeks ago, I came across an awesome thread on X by my friend Fran Walsh. He wrote all about the first $100,000. He also writes an awesome newsletter, which I encourage all of you to check out!

Charlie Munger was notoriously blunt in many of his responses and his takes on money. When asked about hitting that $100,000 milestone, he stated, “It’s a b****, but you gotta do it.”

Saving and investing to reach that $100,000 is no small task, and it is a huge milestone when someone actually achieves it. It should be celebrated, and anyone who says otherwise or tries to diminish the idea that $100,000 is a lot of money should be ignored.

Compounding works wonders, but that $100,000 mark is when things really start kicking in. Think of it this way, you may have really grinded to save $10,000 over the course of the year. $100,000 invested in the S&P 500 during a year like 2024 would have become ~$125,000 by year end.

In the beginning, your ability to save and invest will serve you far better than returns will. But at the end, or when your balances grow, your returns can make your contributions look minimal.

I had actually come across someone celebrating during the April drawdown that their daily unrealized loss in their investment account was equivalent to their first year’s annual salary. While it may seem a little silly and not something someone would ordinarily celebrate, it does show that over time, your returns can far outweigh your ability to save, and with a long-term mindset, that account should continue to grow well beyond that daily unrealized loss.

It works both ways. That same individual likely has seen days where his account has gained more than his first year’s annual salary as well.

So, let’s talk about the first $100,000 and how this is jet fuel for letting investment returns drive growth. Naturally, the earlier this milestone is hit, the more time this money has to grow.

If you started with $0 and you contributed $605 per month for 35 years, you would end up with $1,000,000, assuming this money grew at 7% and compounded annually.

Time to reach milestones by $100,000:

$100,000 - ~9.75 years

$200,000 - ~5.75 years

$300,000 - ~4.08 years

$400,000 - ~3.17 years

$500,000 - ~2.58 years

$600,000 - ~2.41 years

$700,000 - ~1.92 years

$800,000 - ~1.75 years

$900,000 - ~1.5 years

$1,000,000 - ~1.41 years

When we talk about compounding sometimes it can be tough to wrap our mind around it. Our brains think linearly, but compounding is exponential. The time it takes to add another $100,000 exponentially decays, but large numbers and the intimidation of $100,000 can cloud our vision.

At 17.5 years, you’d have ~$250,000. It is odd to think that, assuming the rate of return and that monthly savings rate, when your balance reaches roughly $250,000, you are halfway to hitting the million-dollar mark.

Just think that at the end of 35 years, a 10% gain on your portfolio would be $100,000. It took nearly 10 years of investing $605 per month to attain the first $100,000. The tides shift in what is most impactful to your wealth accumulation as time goes on.

This is also why I believe so strongly that investing in yourself and drivers of earnings growth far outweigh investment returns at the start of someone’s career. In the beginning, your ability to save is much more impactful than your rates of return.

A 500% gain on $1,000 is a $5,000 gain.

A 10% raise on $50,000 in annual income also results in an additional $5,000 in income.

Which one seems more sustainable? Which one seems more reasonable?

We all want compounding to work in our favor. Getting to that first $100,000 is not an easy task. It takes time, hard work, a regimented investment strategy, and a hell of a lot of patience.

But the proof is in the pudding. It all gets easier once you hit that $100,000 mark.