Objective information about retirement, financial planning and investments


7 Tips to Become a 401(k) Millionaire


According to Fidelity in an update released in February of this year, the average balance of 401(k) plan participants stood at $112,300, up 7 percent from the balance at the end of the prior quarter. This data is from plans using the Fidelity platform. This came on the heels of significant gains in the stock market in 2019. It will be interesting to see how these numbers change in the wake of the market volatility from the fallout of COVID-19.

Fidelity indicates that about 441,000 401(k) participants and IRA account holders had a balance of $1 million or more, What is their secret? Here are 7 tips to become a 401(k) millionaire or to at least maximize the value of your 401(k) account.

Be consistent and persistent 

Investing in your 401(k) plan is more of a marathon than a sprint. Maintain and increase your salary deferrals in good markets and bad.

Contribute enough 

In an ideal world every 401(k) investor would max out their annual salary deferrals to their plan which are currently $19,500 and $26,000 for those who are 50 or over.

If you are just turning 50 this year or if you are older be sure to take advantage of the $6,500 catch-up contribution that is available to you. Even if your plan limits the amount that you can contribute because of testing or other issues, this catch-up amount is not impacted. It is also not automatic so be sure to let your plan administrator know that you want to contribute at that level. 

According to a Fidelity study several years ago, the average contribution rate for those with a $1 million balance was 16 percent of salary. The 16 percent contribution rate translated to a bit over $21,000 for the millionaire group.

As I’ve said in past 401(k) posts on this site, it is important to contribute as much as you can. If you can only afford to defer 3 percent this year, that’s a start. Next year try to hit 4 percent or more. As a general rule it is a good goal to contribute at least enough to earn the full match if your employer offers one.

Take appropriate risks 

As with any sort of investment account be sure that you are investing in accordance with your financial plan, your age and your risk tolerance. I can’t tell you how many times I’ve seen lists of plan participants and see participants in their 20s with all or a large percentage of their account in the plan’s money market or stable value option.

Your account can’t grow if you don’t take some risk.  

Don’t assume Target Date Funds are the answer 

Target Date Funds are big business for the mutual fund companies offering them. They also represent a “safe harbor” from liability for your employer. I’m not saying they are a bad option but I’m also not saying they are the best option for you. Everyone’s situation is different, be sure you make the best investing decisions for your situation.

I like TDFs for younger investors say those in their 20s who may not have other investments outside of the plan. The TDF offers an instant diversified portfolio for them.

Once you’ve been working for a while you should have some outside investments. By the time you are in your 30s or 40s you should consider a portfolio more tailored to your situation.

Additionally Target Date Funds all have a glide path into retirement. They are all a bit different: you need to understand if the glide path offered by the TDF family in your plan is right for you. 

Invest during a long bull market 

This is a bit sarcastic but the bull market for stocks that started in March of 2009 and recently ended with the market decline in the wake of the COVID-19 pandemic, is in part why we’ve seen a surge in 401(k) millionaires and in 401(k) balances in general. The equity allocations of 401(k) portfolios have driven the values higher.

The flip side are those who swore off stocks at the depths of the 2008-2009 market downturn and have missed one of the better opportunities in history to increase their 401(k) balance and their overall retirement nest egg.

Don’t fumble the ball before crossing the goal line 

We’ve all seen those “hotdogs” running for a sure touchdown only to spike the ball in celebration before crossing the goal line.

The 401(k) equivalent of this is to just let your account run in a bull market like this one and not rebalance it back to your target allocation. If your target is 60 percent in stocks and it’s grown to 80 percent in equities due to the run up of the past few years you might well be a 401(k) millionaire.

It is just as likely that you may become a former 401(k) millionaire if you don’t rebalance. The stock market has a funny way of punishing investors who are too aggressive or who don’t manage their investments.

Pay attention to those old 401(k) accounts 

Whether becoming a 401(k) millionaire in your current 401(k) account or combined across several accounts, the points mentioned above still apply. In addition it is important to be proactive with your 401(k) account when you leave a job. Whether you roll the account over to an IRA, leave it in the old plan or roll it to a new employer’s plan, make a decision. Leaving an old 401(k) account unattended is wasting this money and can hinder your retirement savings efforts.

The Bottom Line 

Whether you actually amass $1 million in your 401(k) or not, the goal is to maximize the amount accumulated there for retirement. The steps outlined above can help you to do this. Are you ready to start down the path of becoming a 401(k) millionaire?

Approaching retirement and want another opinion on where you stand? Not sure if your investments are right for your situation? Need help getting on track? Check out my Financial Review/Second Opinion for Individuals service for detailed guidance and advice about your situation.

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  1. Jack Towarnicky says

    Roger, thank you.

    Late last century, more than 15 years ago, when I was last in a plan sponsor role, we welcomed new hires during the onboarding process by providing them a “free lunch” – forcing them to sit while they ate through an hour long presentation titled “Will You Be A 401(k), Middle Class Millionaire?” The presentation focused on a few of the items you highlighted above – and it featured props – handouts of real cash as we demonstrated the nature of pre-tax contributions, match, and earnings.

    The message had a lot of components, but most of all, we highlighted the following:
    (1) You now work here,
    (2) This is what we are offering (with a match, etc.), and
    (3) Someday, you too won’t work here anymore, and the question will be, did you leave money on the table, or did you get everything you could out of the benefit plan – the tax preferences, accumulations, match, etc. ?

    Yes, on the first day of work – they thought we were crazy by bringing up the point that there was life after Employer X.

    Again, thanks for pointing out the opportunity working Americans have. As you know, if you get started early enough, save consistently enough, don’t ignore investment risks, don’t take in-service withdrawals (use loans to access funds from the “Bank of Roger”), etc., and allow it to accumulate, even after separation, you too can be a 401(k) middle class millionaire.

    The session was designed to sell participants that it was possible – if you had the time (30, 35, 40 years, including years prior to coming to Employer X). Once my session participants were sold that it was possible – my demonstrations showed that through consistent, persistent savings and investing over a full working career – 30, 40 or more years, I also pointed out that while saving might accumulate to $1MM in 35 years, no one knows what $1MM will be worth in 35 years.

    The example I used to use was:
    1. Is a $1MM a lot of money today? Would you have shown up at work today if you had $1MM in your 401(k)? A few would answer it was a lot of money – no one would admit to having $1MM. What percentage of Americans (in 2000) have $1MM or more? ( about 7%).

    2. Go back 35 years, to 1965, would $1MM be a lot of money? What percentage of Americans were millionaires in 1965? (< 1%).

    3. And, 35 years from now, in 2035, will $1MM be a lot of money? What about inflation? What percentage of Americans will be millionaires? And I would speculate, "I don't know, maybe it will only buy a loaf of bread, maybe 10%, 15%, 20% of Americans may be millionaires? Well, I don't know, but just in case I live that long, I know what group I want to be in!"

    Best to you. Jack

    • Roger Wohlner says

      Jack thank you for your comment. It sounds like the intro session your former employer offered was right on the money because in the end taking the fullest advantage of the plan offered and not feeling like you left money on the table down the road are both key.

  2. Here is how we are making our way towards a 403b-457-IRA millionaires: http://www.millionaireeducator.com/2015/02/hardcore-savings-2014-results-2015-goals.html

  3. Well, I retired short of that 1MM goal. we have a mere $ 751,000 a paid for 15 year old home, cars and no debt. We -my wife of 41 years and I- and only one time did our combined income total over 6 figures. Well, we feel kind of good, all things considered.
    No, Roger I contributed 15% she pout in as much as 32% of her salary, but we just were never huge earners in the economy of our world. Maybe our asset allocations were not aggressive enough, or maybe we retired too early? I retired at 60 from Federal service because I could, she at 62 because she was tired of the rat race.
    Money isn’t everything, and Time is the one thing we can not buy. We are happy, and my small Fed FERS pension, and social security are more than enough. Our money is invested today at Vanguard in a 60/40% stock/bond portfolio and seems to be doing OK. Perhaps a million would be nice, but at 63 for us both, it seems adequate. I’ll let you know if we run out of money, but our current 2-3% draw rate seems adequate compared to the earnings we have been earning! Now, how long will we live??
    Great article, and advice all should heed.

    • Roger Wohlner says

      Roy thank you for the comment and for sharing your story. It sounds to me like the two of you are a role model for all retirees and those looking to get there. Best wishes for continued success and a long, happy and healthy retirement.

      • roy stacey says

        Well Roger,

        We knew ‘retirement’ was up to us, beyond the small FERS pension from my federal service, and social security. While there is no guarantee any of us will live until our retirement, there is misery ahead if you do live, and never planned for it. So simple really, our employers offered us “free money” if all I do is save some of my own, my wifes’ did the same. We took their offer for the “free money” as we were going to be saving anyway. Saved a meaningful amount of income, I mean what if you really need that money later, right?
        Lived on our new take home numbers, watched what we bought, but we were never ‘deprived’ of a dam thing. We just never bought “too much” so we stayed out of credit card debt. Sure, we had a house payment for nearly 14 years, and financed cars for short periods (36 months). I don’t like DEBT, it serves only the lender, not me. I have no ‘secret to success’ only to try to live within your earnings.

        • Roger Wohlner says

          Roy I think the two of you are great examples that all looking to retire in comfort and on their own terms could learn from.

  4. Aaron Stephenson says

    Just spent over an hour reading some of your posts. I appreciate your free advice. I am 26 years old. I have made bad investments but have never stopped putting $400/mo to retirement contribution. I will be sharing your website with many of my friends and colleagues.

    • Roger Wohlner says

      Aaron thanks for your comment and for visiting the site. I’m glad you found some of the articles useful and at your age continuing to contribute to your retirement accounts is a great way to build a solid retirement nest egg down the road. Certainly as your income increases you will want to increase the amount of your contributions. Even a 1% increase each year will add up to a substantial amount over time.

  5. Great tips. I want to be a 401 K millionaire. This year I plan on maxing out my 401. Hopefully, being persistent will help.

    • Roger Wohlner says

      Nate thanks for the comment. I wish you well and even if your account doesn’t hit $1 million maxing it out and being persistent are great ideas to help you build up as much as you can towards your retirement.


  1. […] 7 Tips to Become a 401(k) Millionaire from Roger Wohlner […]

  2. […] 7 Tips to Become a 401(k) Millionaire […]

  3. […] Investing in your 401k plan is a marathon rather than a sprint. Maintain and increase your salary deferrals in good markets and bad. Rebalance your portfolio periodically. Many plans have an auto-rebalance feature that allows participants to set their accounts to rebalance back to their desired allocation at regular intervals. Ideally, you would do this every six months, no more frequently than quarterly and no less than annually. […]

  4. […] Investing in your 401k plan is a marathon rather than a sprint. Maintain and increase your salary deferrals in good markets and bad. Rebalance your portfolio periodically. Many plans have an auto-rebalance feature that allows participants to set their accounts to rebalance back to their desired allocation at regular intervals. Ideally, you would do this every six months, no more frequently than quarterly and no less than annually. […]

  5. […] If you’re young, preparing for retirement may seem premature, but start saving smartly now and you could be a millionaire before you retire. If you’re one of those with 401(k) that has far less than $1 million in it, Roger Wohlner, The Chicago Financial Planner, has 7 tips to become a 401(k) millionaire: […]

  6. […] Tips to Become a 401K Millionaire by The Chicago Financial Planner […]

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