Here’s How Investing $50 Per Week Can Generate $35,000 in Annual Dividend Income by Retirement

Investing for the future can be difficult, as unexpected expenses always seem to come up. One way to try to encourage yourself to invest is by not aiming for massive savings goals. Instead, slowly putting aside money on a weekly basis can be much more achievable, and still allow you to build up your portfolio’s balance over the long haul.

And if you can do that, you could be on the path to creating a tremendous portfolio by the time you retire. Below, I’ll show you how saving and investing $50 per week can ultimately transform into $35,000 or more in annual dividend income by the time you retire.

How saving $50 per week can result in a portfolio worth around $800,000

If you invest $50 per week, that’s the equivalent of $200 per month, or approximately $2,400 per year. Over a 30-year period, that would result in more than $72,000 in savings. It’s a good chunk of savings, but it isn’t a life-changing amount.

This is where the power of compounding comes into play. If instead of putting that $50 into your bank every week, you invested it into an exchange-traded fund (ETF), you could accelerate your portfolio’s growth significantly. Suppose, for example, that you invest that money in a fund such as the Invesco QQQ Trust (QQQ -0.09%).

That fund tracks the top 100 non-financial stocks on the Nasdaq, and it can help give you exposure to some of the best growth stocks in the world, including Microsoft, Nvidia, Apple, and many others. Over the past 20 years, the fund has generated total returns (including dividends) of 1,3950%. That averages out to a compounded annual growth rate of 14.4%. For the sake of being conservative, let’s assume that the growth rate you might average from that fund moving forward might be closer to around 12%.

Assuming you were to invest $50 per week into the fund, this is how your portfolio balance could climb over a 30-year period.

Calculations by author. 

By year 30, your portfolio could be worth around $770,000. The actual growth rate you average over that period will ultimately determine how high the balance will be. But it would be a much larger nest egg than simply saving that $50 per week and tucking it away into a bank account.

Turning that savings into a stream of recurring dividend income

Once you have that nest egg built up, you can put it to work accumulating dividend income for you. An example of a dividend-focused fund you could invest in today is the Vanguard International High Dividend Yield Index Fund, which yields around 4.9%. At that high of a rate, you could generate more than $37,000 in annual dividends per year.

You don’t have to aim that high, however. As long as you can obtain a yield of around 4.6%, that would be enough to generate $35,000 in dividend income based on a portfolio balance of $770,000. And if you can get your portfolio even higher than that, then you would need even less of a yield to achieve that level of dividend income.

Saving and investing is a powerful combination

You may not have thousands of dollars saved up today, but any amount you can save and put into an ETF can help pave the way for a better future in the long run.

In the above example, I used $50 per week, but if you can save and invest more, that can help accelerate your portfolio’s growth, which is why the number of investing years you have left may not be of utmost importance; you can make up for having fewer years remaining until retirement by saving and allocating more money to your portfolio.