Millionaire Secrets: Are 401(K)S Still In The Game?

401(k) accounts are a popular way to invest for many people, and millionaires are no exception. Research shows that 401(k) accounts provide a limited pool of investment options -- usually consisting of index funds. 401(k) accounts offer significant advantages over other accounts, including the ability to invest with pre-tax dollars and the chance to earn an employer match if your company offers one.

Millionaires investing in 401k

Investing in a 401(k) account can be a great way to retire a millionaire. A 401(k) offers significant advantages over other accounts, including the ability to invest with pre-tax dollars and the chance to earn an employer match if your company offers one.

Research the options carefully to make sure you're choosing investments with minimal fees that are appropriate to your life stage. As you get older, you'll want to make your portfolio more conservative. But don't start out too overcautious and put too little of your money into the stock market, or becoming a millionaire will become really difficult.

If you contribute enough money, take advantage of your employer match, and make smart investment choices, it's very likely your 401(k) can make you a millionaire -- especially as the contributions you make are made with pre-tax dollars, so the government is essentially subsidizing your efforts to save.

There was a record-setting spike in the number of millionaires investing in the Thrift Savings Plan (TSP), the federal government’s version of a 401(k). As of Sept. 30, out of nearly 5.9 million participants, there were 55,183 TSP millionaires, up from 45,219 in the previous quarter, according to the Federal Retirement Thrift Investment Board. Year over year, the number of TSP millionaires increased about 40 percent.

Wes Shannon, Registered Investment Adviser at SJK Financial Planning, LLC in Fort Worth, Texas, knows several people who became 401(k) millionaires prior to retirement. “It actually is much more common than people expect,” he says. “All of these individuals started with saving 10% of their income into their 401(k)’s up to the annual maximum contribution. It is much easier to start at 10% and live on 90% of pay from the beginning. Most of these received a company match of 100% on 3% to 5% of pay and the amount over that was just invested without a match. Think about it, if you put in 10% and your company matches another 3% you are making a guaranteed 30% return on your investment.”

Employer match

Research has shown that most 401(k) accounts provide a limited pool of investment options -- usually consisting of index funds. It is important to research the options carefully to make sure you're choosing investments with minimal fees that are appropriate to your life stage. As you get older, you'll want to make your portfolio more conservative.

Crossing the millionaire threshold is a momentous investment achievement. Jeanne Thompson, senior vice president for Fidelity, said that the people who were able to keep their jobs and keep their hours, for those people, they really did see that they just continued to contribute and continued to take advantage of the company match.

Wes Shannon, Registered Investment Adviser at SJK Financial Planning, LLC in Fort Worth, Texas, knows several people who became 401(k) millionaires prior to retirement. He says that all of these individuals started with saving 10% of their income into their 401(k)’s up to the annual maximum contribution.

Josh Simpson, Financial Advisor at Lake Advisory Group in Lady Lake, Florida, says that it is much more common than people expect. He says that most people, like him, were always skeptical of these stories because he had never met any of these people. However, after he became a financial advisor, he started to meet several of these people who had worked and saved and were able to join the ranks of the millionaires.

Pre-tax dollars

• K) accounts provide a limited pool of investment options -- usually consisting of index funds. Research the options carefully to make sure you're choosing investments with minimal fees that are appropriate to your life stage. As you get older, you'll want to make your portfolio more conservative. But don't start out too overcautious and put too little of your money into the stock market, or becoming a millionaire will become really difficult. If you contribute enough money, take advantage of your employer match, and make smart investment choices, it's very likely your 401(k) can make you a millionaire -- especially as the contributions you make are made with pre-tax dollars, so the government is essentially subsidizing your efforts to save.
• K) accounts offer the ability to invest with pre-tax dollars as well as the chance to earn an employer match if your company offers one. Wes Shannon, Registered Investment Adviser at SJK Financial Planning, LLC in Fort Worth, Texas, knows several people who became 401(k) millionaires prior to retirement. “It actually is much more common than people expect,” he says. “All of these individuals started with saving 10% of their income into their 401(k)'s up to the annual maximum contribution. It is much easier to start at 10% and live on 90% of pay from the beginning. Most of these received a company match of 100% on 3% to 5% of pay and the amount over that was just invested without a match. Think about it, if you put in 10% and your company matches another 3% you are making a guaranteed 30% return on your investment.”

Jeanne Thompson, senior vice president for Fidelity, said: “The people who were able to keep their jobs and keep their hours, for those people, we really did see that they just continued to contribute and continued to take advantage of the company match.”

Josh Simpson, Financial Advisor at Lake Advisory Group in Lady Lake, Florida, says: “We have all read the stories about the millionaire next door who built their wealth from essentially nothing by investing in the retirement plan at their job. Like most people, I was always skeptical of these stories because I had never met any of these people. However, after I became a financial advisor, I started to meet several of these people who had worked and saved and were able to join the ranks of the millionaires. One of the couples spent their lives working and saving through their 401(k) while he worked in automotive sales and she worked in accounts receivable for a payroll company in the Midwest."

There was a record-setting spike in the number of millionaires investing in the Thrift Savings Plan (TSP), the federal government’s version of a 401(k). As of Sept. 30, out of nearly 5.9 million participants, there were 55,183 TSP millionaires, up from 45,219 in the previous quarter, according to the Federal Retirement Thrift Investment Board. Year over year, the number of TSP millionaires increased about 40 percent. The number of millionaires -- before taxes, of course -- is a relatively small percentage of the total number of retirement plan participants. Nonetheless, crossing the millionaire threshold is a momentous investment achievement.

Investment options

Investing in a 401(k) account can be a great way to retire a millionaire. 401(k) accounts offer significant advantages over other accounts, including the ability to invest with pre-tax dollars and the chance to earn an employer match if your company offers one.

Research the options carefully to make sure you're choosing investments with minimal fees that are appropriate to your life stage. As you get older, you'll want to make your portfolio more conservative. But don't start out too overcautious and put too little of your money into the stock market, or becoming a millionaire will become really difficult.

Most 401(k) accounts provide a limited pool of investment options -- usually consisting of index funds. If you contribute enough money, take advantage of your employer match, and make smart investment choices, it's very likely your 401(k) can make you a millionaire -- especially as the contributions you make are made with pre-tax dollars, so the government is essentially subsidizing your efforts to save.

There was a record-setting spike in the number of millionaires investing in the Thrift Savings Plan (TSP), the federal government’s version of a 401(k). As of Sept. 30, out of nearly 5.9 million participants, there were 55,183 TSP millionaires, up from 45,219 in the previous quarter, according to the Federal Retirement Thrift Investment Board. Year over year, the number of TSP millionaires increased about 40 percent.

Wes Shannon, Registered Investment Adviser at SJK Financial Planning, LLC in Fort Worth, Texas, knows several people who became 401(k) millionaires prior to retirement. “It actually is much more common than people expect,” he says. “All of these individuals started with saving 10% of their income into their 401(k)’s up to the annual maximum contribution. It is much easier to start at 10% and live on 90% of pay from the beginning. Most of these received a company match of 100% on 3% to 5% of pay and the amount over that was just invested without a match. Think about it, if you put in 10% and your company matches another 3% you are making a guaranteed 30% return on your investment.”

Guaranteed return

Investing in a 401(k) account can be a great way to retire a millionaire. 401(k) offers significant advantages other accounts don't -- including the ability to invest with pre-tax dollars as well as the chance to earn an employer match if your company offers one.

K) accounts provide a limited pool of investment options -- usually consisting of index funds. Research the options carefully to make sure you're choosing investments with minimal fees that are appropriate to your life stage. As you get older, you'll want to make your portfolio more conservative. But don't start out too overcautious and put too little of your money into the stock market, or becoming a millionaire will become really difficult.

If you contribute enough money, take advantage of your employer match, and make smart investment choices, it's very likely your 401(k) can make you a millionaire -- especially as the contributions you make are made with pre-tax dollars, so the government is essentially subsidizing your efforts to save.

Wes Shannon, Registered Investment Adviser at SJK Financial Planning, LLC in Fort Worth, Texas, knows several people who became 401(k) millionaires prior to retirement. He says, "It actually is much more common than people expect," he says. "All of these individuals started with saving 10% of their income into their 401(k)’s up to the annual maximum contribution. It is much easier to start at 10% and live on 90% of pay from the beginning. Most of these received a company match of 100% on 3% to 5% of pay and the amount over that was just invested without a match. Think about it, if you put in 10% and your company matches another 3% you are making a guaranteed 30% return on your investment.

Jeanne Thompson, senior vice president for Fidelity, said, "The people who were able to keep their jobs and keep their hours, for those people, we really did see that they just continued to contribute and continued to take advantage of the company match.”

Josh Simpson, Financial Advisor at Lake Advisory Group in Lady Lake, Florida, says, "We have all read the stories about the millionaire next door who built their wealth from essentially nothing by investing in the retirement plan at their job.”

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