How many 401k millionaires are there?

The one million dollar mark is a popular target for retirement savers who want to accumulate enough to live off in retirement. However, achieving this target takes time and effort, and only a small proportion of retirement savers have accumulated at least $1 million in their 401(k) accounts.

A report by Fidelity Investments revealed that the number of 401(k) millionaires increased to 412,000 in the second quarter of 2021. This number nearly doubled from the previous year’s 224,000 401(k) millionaires in the same quarter. The number of 401(k) millionaires was slightly higher than the number of IRA millionaires that stood at 342,000 in the second quarter of 2021.

Fidelity Investments 401(k) Millionaires

Overall, the number of 401(k) millionaires at Fidelity Investments grew to 412,000, an 84% growth over a year. Workers who managed to accumulate more than $1 million in their retirement accounts benefited from the performance of the stock market reaching record highs. The S&P 500 peaked 38.6%, while the NASDAQ Composite rose to 44.2%.  Overall, the number of 401(k) accounts with $1 million increased by 74.5%.

Workers who accumulated more than $1 million in their 401(k) accounts are most likely to have stashed retirement savings steadily for 20 years or more. These workers are often in their 50s and were saving aggressively and taking advantage of matching contributions from their employers.

According to Fidelity Investments, Baby Boomers take up the biggest proportion of 401(k) millionaires, with the average age being 58. Plan participants above age 50 have an edge over younger participants since they can max out their contributions, and still make catch-up contributions on top of the annual contribution limit.

Average 401(k) balances

The overall average 401(k) balances increased post-pandemic, with the average 401(k) balance hitting $129,000 in the second quarter of 2021. This was a 24% increase from the previous year’s average balance of $104,400 in the second quarter.

The growth in average 401(k) balances can be attributed to increased contributions among workers, with at least 12% of workers increasing their contributions in the second quarter of 2021.

In the 401(k) millionaires club, the average 401(k) balance amounted to $1.5 million, based on a report by Fidelity Investments. The median average balance was $1.33 million.

How many 401(k) millionaires were there in 2019 and 2020?

There were more 401(k) millionaires in 2020 than were reported in 2019. In the second quarter of 2020, the number of 401(k) millionaires stood at 224,000, and this number increased to 262,000 in the third quarter of the same year. The average balance in this quarter was $109,600.

In 2019, the number of 401(k) millionaires stood at 196,000 in the second quarter, and this number increased to 200,000 by the third quarter of the same year. The average 401(k) balance stood at $105,200 in the third quarter.

How to Become a 401(k) Millionaire

Reaching $1 million in retirement savings is a popular benchmark for plan participants. Reaching this target, and adding the title “millionaire” is achievable, and it requires consistency, patience, and making appropriate investment decisions.

Here are tips to set you on the right path:

Don’t abandon old 401(k)s

If your employer went out of business, was acquired, or changed location, it might be a hassle finding the recordkeeper for your old 401(k). Hence, once you change jobs, you must decide what to do with your old 401(k) to avoid leaving a trail of old 401(k)s behind.

Generally, you can decide to roll over the 401(k) into an IRA or rollover to a new employer. Whichever choice you make, you should consolidate old 401(k)s to make it easier to manage your retirement assets.

Invest appropriately

Pick investment options based on your age, risk tolerance, and retirement objectives. If you are young and have many years before retirement, you can choose investments with higher volatility since they have higher growth potential. However, if you are invested in conservative assets, your retirement assets will see a lower growth rate, and it will take longer to join the ranks of 401(k) millionaires.

Contribute consistently

Once you are eligible to join your employer’s 401(k) plan, you should start stashing away as much as possible for your retirement. If you start contributing 5% of your salary, you should increase this percentage gradually over the years until you reach the maximum annual contribution. If the employer offers a match, you should contribute as much to collect the full match.

How long does it take to be a 401(k) millionaire?

If you max out your 401(k) contributions every year, it will take about 22 years to join the ranks of 401(k) millionaires. For 2022, you can contribute up to the IRS limit of $20,500, and an extra $6,500 if you are above 50.

Younger retirement savers aged 20 to 34 can become 401(k) millionaires by age 40 if they have been maxing out and investing since 23. Similarly, middle-aged savers aged 35 to 50 can become 401(k) millionaires by age 50 if they have been maxing out their contributions since age 23. Seniors above 50 who have been maxing out since age 23 can become 401(k) millionaires by age 60.