These 5 Steps Can Help You Become a 401(k) Millionaire

For the most part, 401(k) millionaires don’t earn huge salaries. Brokerage and investment advisor Raymond James says people with hefty retirement balances are generally average workers who stick to a few basic principles.

These five habits can help you get to that magic million in your retirement account:

Start saving early. If it’s too late for you to start early, turn up that savings rate now. Don’t forget about stashing money in an IRA — hitting that $6,500 target ($7,500 if you’re 50 or older) can motivate you to boost your savings in other accounts.

Max out your contributions. In 2023, you can stash up to $22,500 — $30,000 if you’re 50 or older — in a 401(k). Successful savers generally save 10% to 15% of their income for retirement. If you’re saving less, turn up your contribution rate by a percent or two. You probably won’t feel the difference, but your account most certainly will.

Get that employer match. If your company offers a matching contribution, try to contribute the minimum required to earn it — even if you can’t max out your 401(k). It’s free money.

Choose the right asset allocation. It doesn’t pay to be completely risk-averse. Raymond James notes that the average 401(k) millionaire invested roughly 75% of their portfolio in growth-oriented investments such as equity mutual funds.

Don’t cash out early. Early withdrawals come with tax consequences and other penalties. Worst of all, you lose out on years of compounding interest. If you change jobs, roll your account balance into a new plan or into an IRA.

It’s never too late to beef up your retirement savings — you could be closer to the league of 401(k) millionaires than you think. For more, read Adam Hardy’s story. 

— Jill Cornfield, deputy editor

Social Security’s trust funds are in about the same shape as they were last year, according to the 2023 Trustees’ Report. The latest word is that the funds can keep on paying full benefits for 11 more years but will then run into a serious, though “manageable,” funding shortfall. If that does happen, certain steps will have to be taken, such as boosting the amount of tax revenues that go into the system. Fortunately, polls show, most people are willing to pay more to strengthen the program, says the Center on Budget and Policy Priorities.

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