Could investing in a simple, low-fee S&P 500 index fund today set you up for life? You may not want to know the answer. You may prefer to hunt for exciting growth stocks instead. But I'm here to tell you that regularly plunking meaningful sums in an S&P 500 index fund can do wonders over long periods.

Even Warren Buffett has endorsed S&P 500 index funds, stipulating in his will that much of what he leaves his wife should go into one. Here's a look at why you might consider investing in an S&P 500 index fund, too.

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Meet the S&P 500 index

An S&P 500 index fund is an index fund that tracks the S&P 500 -- an index (a grouping) of 500 of the biggest companies in the U.S. The fund will hold roughly or exactly the same stocks in roughly the same proportion, aiming for roughly the same performance -- less fees. And there are some very low fees out there.

Here are the recent top 10 components in the index by weight:

Data source: Slickcharts.com, as of April 16, 2025.

It's worth noting that this index is a market-capitalization-weighted one, meaning that the biggest companies in it will move its needle the most. For example, you can see in the table above that Microsoft's weighting is about four times that of Tesla, so Microsoft's stock-price moves will make a much bigger difference in the index than will Tesla's. Of course, these are still the top 10 components. General Mills is also in the index, recently in 255th place, and with a weighting of just 0.07%. Toy company Hasbro, in 488th place, recently had a weighting of 0.02%.

Altogether, these 500 companies make up about 80% of the total value of the U.S. stock market. Thus, the S&P 500 is often used as a proxy for the market. It's mainly made up of giant, large, and medium-sized companies, though. If you want a more accurate proxy, you might opt for a broader index fund, such as the Vanguard Total Stock Market ETF (NYSEMKT: VTI), which aims to include all U.S. stocks, including small and medium-sized ones, or the Vanguard Total World Stock ETF (NYSEMKT: VT), encompassing just about all the stocks in the world.

Why invest in an S&P 500 index fund?

Here's a top-notch S&P 500 index fund to consider -- the Vanguard S&P 500 ETF (NYSEMKT: VOO). Its expense ratio (annual fee) is a mere 0.03%, meaning that for every $1,000 you have invested in the fund, you'll pay an annual fee of... $3.

Why invest in such a fund? Well, because it can perform really well over time and it's way easier to just keep adding money to it than to spend time studying investing and scouring the stock market for the best investments. Instead of looking for a few needles in a haystack, buy the haystack!

Owning shares of an S&P 500 index fund means you'll quickly own (small) chunks of 500 of the biggest companies in America -- and as some companies grow and others shrink over time, the index will be adding and dropping components accordingly.

The table below shows how big a nest egg you might build over time in an S&P 500 index fund, if your money grows at 8%. For context, the S&P 500 has averaged annual gains of around 10% over many decades -- including dividends and not including the effect of inflation. So using 8% is a mite conservative.

Source: Calculations by author.

If that's not convincing enough, know that you probably can't do as well with some other, managed large-cap stock mutual fund. The S&P 500 index has actually outperformed most such funds, which tend to be run by highly trained financial professionals working hard to outperform the index. Over the past 15 years, for example, the S&P 500 bested 89.5% of all large-cap funds.

Whether you opt for a low-fee S&P 500 index fund or not, be sure to have a solid retirement plan, and to be saving and investing in order to have a comfortable financial future.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Selena Maranjian has positions in Alphabet, Amazon, Apple, Berkshire Hathaway, Broadcom, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, Tesla, Vanguard S&P 500 ETF, and Vanguard Total Stock Market ETF. The Motley Fool recommends Broadcom and Hasbro and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

If you're making good use of tax-advantaged retirement accounts such as IRAs and 401(k)s, good for you! They can be powerful helpers as you save and invest for retirement. You need to be aware, though, that once you reach a certain age, some of those accounts will make you take Required Minimum Distributions (RMDs).

Here's a look at what RMDs are, along with several critical things to understand about them. If you mess up with RMDs, the penalties can be quite costly.

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Meet the Required Minimum Distribution

Our friend -- the Internal Revenue Service (IRS) -- requires people to take annual RMDs from accounts such as traditional IRAs, SEP IRAs, and SIMPLE IRAs once they reach the age of 73. When you do so, that income will count as taxable income to you -- so it's smart to account for it when you're devising your retirement plan. Failing to have a retirement plan is a big mistake. Here are seven others, all related to RMDs.

1. Missing the RMD deadline

First, don't be late! You have until April 1 of the year after you turn 73 to take your first RMD. After that, though, the deadlines fall on Dec. 31. So your second RMD will be due on Dec. 31 of the year you turn 74.

You might want to take your first RMD in the year you turn 73. Otherwise you face having to take both your first and second RMD in the same year, the year you turn 74. That can boost your taxable income a lot for that year.

2. Withdrawing the wrong amount -- or not withdrawing at all

When taking your RMD, you'll want to withdraw the correct amount -- at least. You can calculate your RMD by referring to an RMD table, but many good brokerages will calculate your RMDs for you and will often let you set up automatic withdrawals. That can help you avoid missing the deadline, though it's also smart to check now and then to ensure that your brokerage has indeed scheduled your RMD.

If you fail to take your full RMD on time, you'll likely pay a steep price. The penalty for not taking them on time is 25% of the amount you failed to withdraw on time. Fail to take out $6,000, and you may face a $1,500 penalty! (You may be able to pay a smaller penalty if you notice that you just missed the deadline and take action quickly.)

3. Not understanding how RMDs from IRAs and 401(k)s work

Here are some things to know about RMDs from various types of accounts:

• With Roth IRAs and Roth 401(k)s, you do not need to take RMDs.
• With traditional IRAs and with 403(b) accounts, if you have more than one account, once you total your RMDs from all of your accounts, you can withdraw that total sum from just one or from multiple accounts. So if your RMD for the year is $6,000, you could take all $6,000 from just one of your IRAs, or $2,000 from one and $4,000 from another, or some other combination.
• With traditional 401(k)s, you must take the RMD required from each one, and you can't mix and match as you can with IRAs.
• If you're still working, you may not have to take your RMD from your workplace's retirement account until you retire.

4. Thinking your spouse's RMD counts as your own

If you're married and both you and your spouse have RMDs to take each year, you can't withdraw from one of your accounts to satisfy the requirement for the other spouse. So, for example, if your RMD is $6,000 and your spouse's is $4,000, you can't take $10,000 from your account and consider theirs satisfied. Each of you will need to withdraw your own RMDs from your own account(s).

5. Donating to charity without considering a qualified charitable distribution (QCD)

If you donate to charity, you may be able to avoid being taxed on some or all of your RMD if you execute a "qualified charitable distribution" (QCD). Doing so means you would have funds sent directly from your retirement account to a qualifying charity. You cannot just withdraw the money and donate it and then expect to pay no taxes on the withdrawal -- the sum needs to go directly to the charity. There are some other rules, too, so read up on this if it's of interest to you.

6. Spending your RMD when you don't need to do so

Some people mistakenly think they have to take their RMD and spend it. That's not the case. You can always reinvest that money right away, parking it in shares of stock, certificates of deposit (CDs), or wherever you want.

7. Not keeping up with RMD changes

Finally, be sure to keep up with RMD rules, because they can change sometimes. For example, according to some new rules, some beneficiaries must take RMDs from inherited IRAs, depleting them within 10 years. This rule doesn't apply to spousal heirs, but does apply to most heirs who were not married to the IRA owner who died -- if that IRA owner had reached age 73 before dying.

The more you know about retirement accounts, RMDs, and tax matters, the more you may be able to save.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

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Many of us are at least occasionally dreaming of retirement, looking forward to days when we won't have to clock in and work for someone else -- days when we can do more of what we want to do.

If you're counting down to your retirement and are looking forward to collecting Social Security benefits, make sure you're ready to do so. Here are some questions you might ask yourself.

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Image source: Getty Images.

1. Do you qualify for Social Security?

Let's start with some basics. Make sure you qualify to collect benefits. The bar is admittedly low. To be eligible for benefits, you need to earn a total of 40 credits, and you can earn up to four per year -- so you'll need to work and earn money for at least 10 years.

The value of each credit is updated annually, and for 2025, it's $1,810 -- which amounts to just $7,240 over the course of a year. Note that while you need to work at least 10 years, you'll want to aim for 35, because your benefit amount is based on your earnings in the 35 years in which you earned the most. Work for fewer years and some zeroes will get factored into the calculation.

2. Are you at least 62 years old?

Sixty-two is the earliest age at which you can claim your retirement benefits. Know that each of us has a "full retirement age" at which we can start collecting the full benefits to which we're entitled based on our earnings -- and that age is 66 or 67 (It's 67 for those born in 1960 or later.)

While you can turn on the Social Security spigot at age 62, doing so will result in smaller checks, though many more of them than if you claim late. If you delay starting to collect checks, they'll plump up by 8% for each year beyond your full retirement, until age 70.

The decision regarding when to claim your benefits is a big one, so think it through carefully. One study found that for 57% of people, waiting until age 70 will deliver the most total benefits.

3. Do you know how much to expect?

It's important to know how much to expect from Social Security, so that you can plan your retirement accordingly. Yes, the average monthly retirement benefit for retired workers was just $1,981 as of February -- only around $23,750 per year -- but you may well be in line to collect more.

To get a much clearer idea of how much you can expect from Social Security, set up a my Social Security account at the Social Security Administration (SSA) website. Then you'll be able to click in any time to see the latest estimates of your future benefits based on the SSA's records of your earnings.

If you don't like what you see, you're in luck -- because there are multiple ways to increase your Social Security benefits, beyond delaying claiming them. For one thing, while you're still working, try hard to earn as much as possible, even if that means a side gig for a while.

4. Are you able to retire?

It's also important to look beyond Social Security at your bigger financial picture, to see if you can retire. Don't assume that your nest egg will be sufficient until you crunch some numbers. For some people, retiring with a million dollars will be enough, for others it may be much too little -- or too much.

If you find that you're behind in saving and investing for retirement, there are several strategies to consider -- including delaying your retirement a bit.

5. Have you coordinated with your spouse?

If you're married, have you coordinated a Social Security strategy with your spouse? You might, for example, have the higher earner between you delay until age 70, in order to maximize their benefit. The lower earner might start collecting early, late, or somewhere in between -- whatever makes sense given your financial situation.

Why do this? Because when one spouse dies, the survivor will be able to collect whichever benefit is larger for the rest of their life.

6. Have you seen the news?

Finally, here's a somewhat new concern regarding Social Security. Not so long ago, I might simply have offered a warning that the program's surplus is turning into a deficit and if nothing is done to strengthen Social Security, its trustees estimate that beginning in 2035, beneficiaries will receive only 83% of what they're due. Yikes. (There are multiple ways to fix this problem, though.)

Now there's a new concern -- the Trump administration, which is making moves to change Social Security in ways that may leave it weaker, sooner. So it's worth keeping up with developments in the news as they may affect your future financial security. The more you know, the better your retirement plan may be.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.