Secrets of the 401(k) Millionaires
The bull market helped boost balances, but these workers also save more and avoid borrowing against their savings.
![A single golden egg in a nest made from dollar bills isolated on white background.The single egg represents a single investment for the future, usually retirement or a college fund.](https://cdn.mos.cms.futurecdn.net/c2fP7WwtyxYbAyBcxqVZyV-415-80.jpg)
The number of 401(k) accounts with a balance of $1 million or more rose to a record 168,000 in the second quarter, an increase of 41% from a year earlier, according to Fidelity Investments, the nation’s largest plan administrator. Although that’s only a small percentage of 401(k) participants, there were other positive developments. The average 401(k) account balance rose 6% from a year earlier, to $104,000, and the average balance in individual retirement plans, which allow workers to save even if they don’t have a workplace plan, rose to $106,900, up nearly 7%.
The bull market contributed to the growth, but it wasn’t the only factor, says Meghan Murphy, a vice president at Fidelity Investments. Contributions are up, too. The average savings rate, which includes employee savings and company matching funds, was recently 13%, up from 12.5% in 2008. The 401(k) millionaires save even more, says Murphy. The average savings rate for those workers is 17%, and some millionaires save up to 25%, she says. Other characteristics of 401(k) millionaires:
They’re in it for the long haul. Most 401(k) millionaires have been contributing to their plans for 28 to 30 years, even if they’ve changed jobs.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
They’re big on stocks. The 401(k) millionaires typically have 75% to 80% of their savings in stocks, Murphy says. Stocks have historically outperformed other types of investments.
They avoid taking out loans. While most companies allow workers to borrow from their 401(k) plans, loans can put a serious dent in your nest egg. Many plans bar workers from contributing to their accounts until they have repaid the loan. And the money you borrow isn’t invested, which means your account won’t grow as much as it would have if you hadn’t taken out a loan. Fidelity says 20.5% of plan participants had an outstanding loan in the second quarter, compared with a high of 23% in the third quarter of 2013.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.
-
Why This Economist Thinks the Fed Is Already Late to Cut Rates
Moody's Analytics chief economist Mark Zandi talks to Kiplinger about what he thinks the Federal Reserve is getting wrong on inflation.
By Anne Kates Smith Published
-
If You're the Millionaire Next Door, You May Be a Terrible Spender
Good job on all that great saving. Now you need to start spending some of that hard-earned retirement savings on the things you love.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
Medicare Basics: 11 Things You Need to Know
Medicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
By Catherine Siskos Last updated
-
Six of the Worst Assets to Inherit
inheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
By David Rodeck Published
-
403(b) Contribution Limits for 2024
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Published
-
SEP IRA Contribution Limits for 2024
SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 a year.
By Jackie Stewart Last updated
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Last updated
-
SIMPLE IRA Contribution Limits for 2024
simple IRA The SIMPLE IRA contribution limit increased by $500 for 2024 and workers at small businesses can contribute up to $16,000 or $19,500 if 50 or over.
By Jackie Stewart Last updated
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
By Jackie Stewart Published
-
Roth 401(k) Contribution Limits for 2024
retirement plans The Roth 401(k) contribution limit for 2024 is increasing, and workers who are 50 and older can save even more.
By Jackie Stewart Last updated