The 3 secrets of 401(k) millionaires

Saving $1 million in your 401(k) is no easy accomplishment. Most people never make it to that milestone.

Only the top 3.3% of retirement savers had accumulated over $1 million across their accounts as of the end of the last decade, according to estimates from the Employee Benefit Research Institute, based on the latest Federal Reserve Survey of Consumer Finances. But if you know what those 401(k) millionaires know, you could join this elite group.

They don't have any insider information. And most didn't get lucky by vesting company stock in their 401(k) before the price went parabolic. They just understand how to make the most of their 401(k) plan.

Here are three secrets of 401(k) millionaires.

1. They always get their full company match

If there's one thing you must do to make the most of your 401(k), it's to get the full company match. If you aren't contributing enough to get it, you're practically leaving free money on the table.

Every 401(k) plan will have a different matching policy, but the basics are the same for most companies. If you contribute up to a certain percentage of your salary, your company will also contribute an amount up to 100% of your contribution. Some common 401(k) matching contributions are $0.50 per dollar up to 6% of your pay or a dollar-for-dollar match on the first 3% and $0.50 per dollar on the next 2%.

It's worth pointing out that unless you're earning a very high income, you can usually get your full company match with contributions well below the limit for a 401(k). For 2024, the 401(k) deductible contribution limit is $23,000, or $30,500 for workers age 50 or older. So it's not like you need to be some super saver to set yourself up for a $1 million 401(k).

Getting your full company match will typically put your savings rate close to 10% of your salary per year. Even with an average salary of just $60,000 per year, you'll end up contributing $6,000 per year. If you can consistently do that for a full 40-year career, you're very likely to end up with $1 million in your 401(k).

2. They always minimize their fees

For all the benefits of a 401(k) plan, they typically come with one major drawback: The fees can be a significant drag on your investment returns. But if you know what the 401(k) millionaires know, you can minimize the impact of fees on your account.

There are three types of 401(k) fees: administrative, service and investment fees. Unfortunately, you're stuck paying whatever administrative fees your company plan dictates. But when it comes to service and investment fees, you can exercise a lot more control.

Service fees are the one-time charges you might pay for using some of the features of your 401(k) plan. For example, you might have to pay a service fee to take out a 401(k) loan or use a participant-directed account. Those services are totally optional, so you won't pay anything if you don't use them, but the fee could be worth it in some instances.

The bigger cost for most retirement savers are the investment fees. These are charged by funds offered by your 401(k). Finding funds with a low expense ratio will have a massive impact on your overall returns. And the good news is that funds with low expense ratios are usually broad-based index funds, which have historically outperformed actively managed mutual funds, which you might also find in your 401(k) plan.

If you can stick to the lowest-cost funds and avoid unnecessary service fees, you'll be well on your way to joining the 401(k) millionaires.

3. They never interrupt their investments unnecessarily

The biggest secret of 401(k) millionaires is that they've been investing for a long time. What's more, they haven't stopped or withdrawn funds until they need to in retirement.

That means they invested in good times and bad. When stocks looked expensive, they still contributed to their 401(k). When the stock market was crashing and everyone was running for the hills, they still contributed to their 401(k). The discipline of consistently contributing and letting compound earnings work for them is what truly separates 401(k) millionaires from the average retirement saver.

If you want to become a 401(k) millionaire, you have to understand the power of compounding. It might not seem like much that first year you contribute 10% of your salary to your 401(k). It might not even feel like much after the fifth year.

But eventually, you'll see your account growing quicker than you ever imagined as it pushes toward $1 million. That only happens, though, if you keep your money invested and never disrupt it unnecessarily.

If you can manage to consistently invest throughout your career, you should find yourself joining the small group of 401(k) millionaires by the time you're ready to retire.

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