Saving for retirement is never easy, but it’s even more challenging during difficult economic times.

Money is tight for many Americans, and turning $100,000 into $1 million in savings may seem like an impossible goal. Fortunately, you don’t need to currently be wealthy to retire a millionaire — and these four steps can put you on the right path.

1. Take advantage of the stock market
The easiest way to reach $1 million in savings is to not just save, but invest. The stock market can be unnerving at times, but it’s also a wealth-building powerhouse that can help your money grow exponentially.

Historically, the S&P 500 has earned an average rate of return of around 10% per year. In other words, all the annual returns have averaged out to roughly 10% per year over many decades. Comparatively, bonds and other “safer” investments may only earn average returns of around 3% to 4% per year.

While that may not seem like a major difference, it will have an enormous impact on your savings.

For example, say you currently have $100,000 in savings. If you simply let your money sit without making any additional contributions, it would take around 25 years to grow into $1 million if you’re earning a 10% average annual return. With a 4% average annual return, it would take 60 years.

2. Start investing early
Time is your most valuable resource when it comes to saving a lot of money for retirement. Thanks to compound earnings, the more time your investments have to grow, the more you’ll earn.

Say, for instance, you have $100,00 saved for retirement and want to earn a total of $1 million. If you’re earning a 10% average annual return, here’s approximately how much you’d need to invest each month to reach your goal, depending on how many years you have to save:

Every year matters, and putting off investing for even a few years could make it exponentially more difficult to reach your goal. Even if you can’t afford to invest much now, it’s smart to get started sooner rather than later.

3. Invest in the right places
Not all investments are created equal, and if you put your money in the wrong places, you could lose more than you gain.

In general, it’s best to opt for long-term investments with the potential for consistent growth. Short-term stocks that promise to make you rich overnight are incredibly risky, and they rarely pay off. Long-term investments are often slower to grow, but you’re far less likely to lose money.

When in doubt, one of the most reliable investments out there is the S&P 500 index fund. This investment tracks the S&P 500 itself, so it includes the same stocks as the index and aims to replicate its performance.

This investment has a long history of earning positive average returns and recovering from downturns, and it also requires very little effort on your part. Just invest consistently, then give it as much time as possible to grow.

4. Avoid withdrawing your money early
Emergencies come up, and sometimes you have no choice but to tap your retirement savings to cover an unexpected expense. But if at all possible, it’s wise to leave your money alone once you’ve invested it.

If you’re investing through a 401(k) or traditional IRA, you could be hit with a stiff penalty and income taxes if you withdraw your savings before age 59 1/2. But regardless of where you’re investing, withdrawing your money will make it harder to build a $1 million nest egg.

For instance, say you have $100,000 in savings, but you withdraw $10,000 to cover an emergency expense. Assuming you’re earning a 10% average annual return and not making any additional contributions, here’s how that withdrawal will affect your total savings over time:

In other words, that $10,000 withdrawal could ultimately cost you nearly $70,000 in lost potential earnings over 20 years. And if you’re making repeated withdrawals, it could make an even bigger dent in your savings.

Saving $1 million for retirement isn’t easy, but it can be done with the right strategy. By investing in the right places and giving your money plenty of time to grow, you’ll be well on your way to building a million-dollar nest egg.

— Katie Brockman

Where to Invest $99 [sponsor]
Motley Fool Stock Advisor's average stock pick is up over 350%*, beating the market by an incredible 4-1 margin. Here’s what you get if you join up with us today: Two new stock recommendations each month. A short list of Best Buys Now. Stocks we feel present the most timely buying opportunity, so you know what to focus on today. There's so much more, including a membership-fee-back guarantee. New members can join today for only $99/year.

Source: The Motley Fool