In September 2025, the median annual income for full-time workers between the ages of 25 and 34 hovered around $60,000. After accounting for federal and state taxes, even under less favorable scenarios, take-home pay typically amounts to about $45,500 annually. Established financial guidelines suggest saving approximately 20% of this net income for retirement purposes, translating to around $9,100 yearly or roughly $758 each month for the average individual in this demographic.
Even directing half of this recommended monthly saving, equating to $375, toward a specific investment vehicle can lead to substantial wealth accumulation over time. Historical data illustrates that consistently investing $375 every month in the Vanguard S&P 500 ETF (VOO) could potentially grow to an estimated portfolio value of $798,600 after three decades. This accumulated wealth would then be capable of generating an annual dividend payout near $13,500.
What the Vanguard S&P 500 ETF Offers to Investors
The Vanguard S&P 500 ETF is designed to reflect the performance of the S&P 500 index, which consists of 500 large-cap U.S. companies. These firms collectively represent about 80% of the total market capitalization domestically and approximately 40% of the global equity market capitalization. This composition provides investors a broad representation of significant American equity markets through a single fund.
As a result, this fund effectively operates as a diversified portfolio holding many of the world's most impactful and financially significant companies. Currently, the ETF’s five largest component stocks by portfolio weight are as follows:
- Nvidia: 7.3%
- Apple: 7%
- Microsoft: 6.2%
- Alphabet (Google's parent company): 5.7%
- Amazon: 3.8%
One of the attractive aspects of the Vanguard S&P 500 ETF is its remarkably low expense ratio of 0.03%. This means for every $10,000 invested, the annual management fee totals only about $3, a figure significantly below the average expense ratio of roughly 0.34% seen in U.S. index funds and mutual funds generally.
Investment Rationale Behind the Vanguard S&P 500 ETF
The investment merits of this ETF can be distilled into three primary observations:
- The S&P 500 index has outperformed a variety of other asset classes over the past twenty years. This includes comparisons to international stocks, fixed income instruments, real estate investments, and precious metals.
- Historical performance data indicates fewer than 12% of large-cap fund managers have successfully outpaced the S&P 500 during the past 15 years, underscoring the difficulty of consistently beating this benchmark even for professional investors.
- Since 1950, no 15-year stretch has yielded a negative total return for the S&P 500. This consistent upward trend provides patient investors with near certainty of gains over extended horizons.
In sum, the Vanguard S&P 500 ETF’s track record is notable among diversified index funds, especially when factoring in its low associated fees.
Projected Portfolio Growth and Dividend Income Potential
Over the previous thirty years, the S&P 500 registered a total return of approximately 1,860%, which equates to an annualized return near 10.4%. This impressive growth occurred notwithstanding challenges such as four bear markets and three separate recessions during that timeframe.
Assuming similar performance sustains in the future, a disciplined investment of $375 monthly into the Vanguard S&P 500 ETF can reasonably be expected to total around $798,600 after 30 years. Upon reaching this milestone, an investor might choose to cease further reinvestment of dividends. The S&P 500’s average dividend yield over the past decade was about 1.7%, suggesting that a portfolio of this size could generate roughly $13,500 in dividend income annually.
It is essential to note that the principal portfolio would likely continue appreciating if the market maintains an upward trajectory, even without reinvesting dividends. Over the past thirty years, the S&P 500’s annualized return excluding dividends has been approximately 8.4%. Using this figure, the $798,600 portfolio might grow to around $1.3 million in an additional five years, potentially producing about $22,100 per year in dividend income at that stage.