Number of 401(k) Millionaires Hits New High
In the world of retirement savings, becoming a “401(k) millionaire” is a significant milestone. According to Fidelity Investments, the end of 2023 saw a record high of 422,000 401(k) millionaires.1 This news is a cause for celebration and a testament to the power of consistent saving, smart investing, and the long-term benefits of employer-sponsored retirement plans.
Let's look at what this milestone means for the future of retirement.
What Is a 401(k) Millionaire?
Firstly, let's clarify what it means to be a 401(k) millionaire. This term refers to individuals who have accumulated at least one million dollars in their 401(k) retirement accounts. These accounts, offered by many employers, allow employees to contribute a portion of their salary on a pre-tax basis, with potential employer matches and tax-deferred growth.
The 401(k) Millionaire Milestone
Recent reports have shown a substantial increase in the number of 401(k) millionaires across the country. According to data from Fidelity Investments, one of the largest 401(k) providers in the U.S., the number of savers with million-dollar-plus 401(k) accounts has hit a record high. In fact, as of the last reporting period, there were over 400,000 Fidelity 401(k) accounts boasting balances of $1 million or more.1
This significant milestone is a result of various factors aligning, including a decade-long bull market, increased contribution limits, employer matches, and diligent saving and investing habits by account holders.
The Power of Consistency
One of the key lessons from the rise of 401(k) millionaires is the power of consistency. These individuals didn’t amass their wealth overnight. Instead, they diligently contributed to their retirement accounts, often taking advantage of employer matches to maximize their savings potential.
Even small, regular contributions can add up significantly over time, especially when combined with the potential for compound growth. This long-term approach to saving and investing is a powerful strategy for building wealth, as evidenced by the growing number of 401(k) millionaires.
The Role of Smart Investing
Another crucial factor in the success of 401(k) millionaires is smart investing. These individuals often diversified their investments, spreading their money across various assets such as stocks, bonds, and mutual funds. By doing so, they mitigated risk while also taking advantage of market growth.
In addition, many 401(k) plans offer target-date funds and other investment options tailored to different risk profiles and retirement timelines.2 These options make it easier for account holders to make informed investment decisions aligned with their goals.
The Future of Retirement
The rise of 401(k) millionaires is not only a personal achievement for those individuals but also a positive sign for the future of retirement, in the U.S.A more people reach this milestone, it signals a shift towards greater financial security in retirement.
The increasing number of 401(k) millionaires is a noteworthy achievement that demonstrates the effectiveness of disciplined saving, smart investing, and long-term planning. These investors have shown that with consistent effort and sound financial decisions, the goal of a financially secure retirement is within reach.
As always, let us know if you have any questions.
Best,
CRA Investment Committee
Matt Reynolds CPA, CFP®
Tom Reynolds, CPA
Robert T. Martin, CFA, CFP®
Gordon Shearer Jr., CFP®
Jeff Hilliard, CFP®, CRPC®
Joe McCaffrey, CFP®
Phillip Tompkins, CFP®
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