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By Selena Maranjian–Apr 1, 2024 at 5:42AM
Key Points
Relatively few of Fidelity's 401(k) account holders have amassed more than $1 million in their accounts.
But between 401(k)s and IRAs, Fidelity reports close to 800,000 millionaire retirement savers.
Fidelity has also noted five habits of its millionaire 401(k) account holders.
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Becoming a millionaire may be much more achievable than you think.
In February, as it does regularly, Fidelity released information on its customers with 401(k) accounts and how they're doing. This is always kind of a big deal because Fidelity is a behemoth among 401(k) administrators that companies hire to manage their workers' retirement savings.
Specifically, Fidelity noted that as of the end of 2023, the number of 401(k) accounts with balances of $1 million or more was 422,000, up a hefty 21% over the previous quarter. (Also noteworthy was Fidelity finding that its IRA customers with accounts valued at a million dollars or more hit a record 391,562.)
Image source: Getty Images.
There's a good chance that you have a 401(k) and/or an IRA account, in which you're saving for retirement -- something most of us really need to do. There's also a good chance that your account hasn't hit seven digits yet. If so, don't despair -- because millions of non-millionaires can become millionaires, if they take certain steps.
More from the Fidelity report
Fidelity shed more light on the wealthiness of its account holders in its last report. For example, while the total 800,000-plus accounts with a million dollars or more is a wonderfully big number, making clear that it's not that uncommon to be a millionaire, it's still not that common. The Fidelity millionaires made up only 1.8% of 401(k) accounts and 2.6% of IRA accounts.
The median Fidelity 401(k) balance by the end of 2023 among those with $1 million or more in their 401(k)s was $1.34 million, and the median age of millionaire account holders was 59. That suggests that many of these folks have been diligent about saving for their future for a long time, rather than just getting lucky. The age of 59 is also very close to when many Americans retire, so those doing so soon will likely be retiring with around $1.3 million. That's a solid number, but a million dollars may not be enough for many people. Much depends on your other income sources, your spending habits and needs, and your local cost of living, among other things.
Here's how someone might have amassed a million dollars or more via a 401(k) -- or IRA -- if they invested meaningful sums regularly and earned an average annual return of 8%:
Growing at 8% For: | $7,500 Invested Annually | $15,000 Invested Annually |
|---|---|---|
5 years | $47,519 | $95,039 |
10 years | $117,341 | $234,682 |
15 years | $219,932 | $439,864 |
20 years | $370,672 | $741,344 |
25 years | $592,158 | $1,184,316 |
30 years | $917,594 | $1,835,188 |
35 years | $1,395,766 | $2,791,532 |
40 years | $2,098,358 | $4,196,716 |
Data source: author.
If someone had been socking away around $15,000 annually starting around age 35, they may have crossed the million-dollar line by around age 60.
Fidelity's tips for becoming a 401(k) millionaire
About a decade ago, Fidelity released a list of tips for those who wanted to join the millionaire club, based on the habits of its wealthier customers. Here are the five habits you might want to adopt -- they're just as valid now as they were in 20214:
- Start saving early: The table above clearly shows the value of starting early. Doing so can help you reach millionairehood much earlier, or can help you get there when investing smaller sums. Always remember that your earliest invested dollars are you most powerful, as they have the most time in which to grow.
- Contribute at least 10% to 15% to your 401(k): Some common advice is to sock away 10% of your income for retirement -- but for the millions who are behind, 10% won't be enough. Consider saving 15% or even more if you can. That money can help you achieve the retirement you want.
- Max out any employer matching funds: Many employers offer matching funds in their 401(k) plans. If yours does, aim to contribute at least enough to grab all available matching dollars, because that's free money.
- Focus primarily on stocks: Over long periods, such as decades, it's been hard to beat the performance of stocks. Stocks have outperformed bonds, cash, gold, and more over many multi-decade periods. So consider favoring stock investments in your retirement accounts -- at least until you're five or 10 years from retiring. Then read and learn more, and reconsider.
- Don't cash out your account when you change jobs: Finally, know that many people cash out their 401(k) accounts when moving from job to job -- and that you should not do so. For one thing, you may get whacked by penalties and taxes. But more importantly, removing any sum from your retirement savings also removes what it might have grown into. Have only $30,000 in your 401(k)? Leaving it in your account (or rolling it over into an IRA) might get you close to $140,000 or more in 20 years -- a very handy sum when you're retired.
So as long as you have some years before retirement, know that by saving and investing effectively, you can improve your financial condition before retiring. And if you have enough time, you may even join the millionaire club.
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