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Want to join the 401 (k) Millionaires Club? Here's how – The Motley Fool

We hear a lot about Americans generally failing to save enough for retirement, but of course there are enough outliers. In fact, the number of workers with $ 1 million or more in their 401 (k) plans jumped to 157,000 at the end of the first quarter of this year, according to Fidelity. That's an increase of 45% over the previous year.

Of course, certain factors have fueled this accumulation of wealth. First, the stock market had a killer year in 2017, which undoubtedly led to a rise in balance sheets close to the $ 1 million mark. In addition, Fidelity reports that many of the above 401

(k) millionaires save for a solid 30 years.

  One counts $ 100 bills

Source: Getty Images

Still, it's just showing that with a good dose of effort, it's possible to raise $ 1 million and thereby comfortably retire go. If that's the kind of destination you have in mind, here's how to get there.

. 1 Start saving early in your career

Many younger workers consider retirement a distant milestone that does not require their immediate attention. But the longer you spend on the future, the greater your chances of earning $ 1 million – or whatever your personal goal is.

You can now contribute $ 18,500 a year to your 401 (k) if you're under 50, or $ 24,500 if you're 50 or older. However, most people can not afford to part with this amount each year. But if you start saving early enough in your career, you can get away with putting aside much less month after month. Look at the following table, which shows how a modest monthly contribution of $ 300 will grow depending on the length of your bankbook:

If you save at the age of $ 300 per month:

What you mean by age will have (19659011) 25

$ 1.39 million


$ 932,000


$ 620,000


$ 408,000

45 [19659012] $ 263,000


$ 165,000


$ 35,000

Author's Table and Calculations

As you can see, if you commit to most of your career, you can save a number from $ 300 monthly contributions to well over $ 1 million. Even if you miss the boat too early and can not save for almost a decade, you can still be pretty close. But the longer you wait, the more money you'll have to pay off each month to get a chance on those $ 1 million – and the more you risk it when retirement is over.

. 2 Make the Most of Your Employer Match

If you're lucky enough to have a 401 (k), you probably have the chance to get some money for it. This is because an estimated 92% of companies sponsoring 401 (k) s are willing to bring workers' contributions to some degree.

The problem? About 25% of workers do not contribute enough to crack this match, leaving a cumulative $ 24 billion in unclaimed $ 401 (k) dollars on the table. At the individual level, this means $ 1,336 in lost money each year.

If you are serious about gaining the status of a millionaire in your 401 (k), you will need to spend enough money each year to claim your employer in full dollars. Also keep in mind that if you spend any amount of free money every year, it is not just the principle that you give up; They also make use of the associated growth.

Imagine you lose $ 1,336 a year over a 10-year period because you do not contribute enough to win your game and then resign 20 years later. All in all, you've missed more than $ 90,000 in taking into account potential profits for this lost money (assuming that your investments average 8% return each year).

. 3 Invest Your Savings Carefully

You may have noticed that for our various calculations, we have used an average return on investment of 8% so far. The reason for this 8% is that it is only slightly below the average of the stock market, which means that it is a pretty fair yardstick for the projection of returns. But what happens if you shy away from stocks and instead invest more conservatively? It's simple: you reduce your chances of retiring a millionaire.

Imagine slumping $ 300 a month over a 45-year period, just to be on the safe side and getting an average return of 4% instead of 8%. In that case, you would see a final balance of $ 436,000, which is much less than $ 1.39 million. Although stock investments involve some risk, you should invest your money there if you have a 10-year window or longer before retirement. Not only will you have a reasonable amount of time to weather the ups and downs of the market, but you will most likely get higher returns that increase your wealth.

Retirement with $ 1 million or more often results in consistent savings and wise investment decisions. Cover yourself in both respects, and if all goes well, you will be on your way to join the ranks of the proud 401 (k) millionaires who are looking forward to retirement.

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