The S&P 500 (SNPINDEX: ^GSPC) has always moved higher over long periods of time, and the index has consistently outperformed investment-grade bonds, real estate, and gold. That makes an S&P 500 index fund a very compelling investment option when saving for retirement.

Famed investor Warren Buffett himself recommends that strategy. An S&P 500 index fund is essentially a basket of U.S. stocks, and Buffett believes that basket is "virtually certain to be worth far more in the years ahead."

The Vanguard S&P 500 ETF (NYSEMKT: VOO) in particular could turn $450 per month into $939,100 over three decades. That portfolio could then generate $17,100 in annual dividend income in retirement. Here's how.

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Source Fool.com