“Hey Dad, can I become a millionaire working at my job?
You absolutely can, kids:
I remember when I started out in Corporate America, my boss said to me, “you will never get rich working for somebody”. He insisted that the only way to get rich is to own your own business. As an impressionable young man, I thought through some ideas of what kind of business I could start. “Let’s face it, we all want to be millionaires!” What I found is not everyone has the desire to run their own business and not everyone is cut out to be a business owner. Some who have tried owning their own business severely underestimated the amount of work that’s involved and the level of commitment necessary to be successful. I have come to appreciate my paycheck being directly deposited into my bank account, every 15th and 30th of the month…“thank you very much”. NEWSFLASH:
According to the Startup Failure Rate Statistics (2023), across almost all industries, the average failure rate for year one is 10%. However, in years two through five, a staggering 70% of new businesses will fail.
There’s got to be a better way. How about the Lottery? “Ok, that hasn’t worked yet”.
After digging a little deeper, I found the data that proved that my old boss had no idea what the heck he was talking about. According to The National Study of Millionaires, about 79% of millionaires built their wealth through employer-sponsored retirement plans (401k, 403b), and only 31% averaged $100,000 a year over the course of their career. “It’s looking good for you kids”.
Through August 18, 2023, Fidelity Investments found 378,000 employees with 401k balances over $1 million, up from 299,000 at the end of 2022. Clearly, there are some people who have figured this thing out. Here’s what I’ve learned:
5 Steps For Anyone To Become A 401k Millionaire - Forbes
1) Open A 401k Account - If your organization you would be crazy not to set up an account and get what is essentially free money from your employer.
2) Contribute Enough Money To Your 401k Account - A rough rule of thumb is to save at least 15% - 20% of your gross salary. If you start late or want to quickly become a 401k millionaire, you will want to save even more.
3) Invest Your 401k Contributions - Know where your money is being invested in your 401k. Make sure that the funds that you are invested in are keeping up or exceeding the returns of the overall market.
4) Take The Time To Become A 401k Millionaire - Know that it takes time to become a millionaire. Here are some rough calculations to become a 401k millionaire. We are assuming an 8% return on your retirement account investment:
48 years requires about $170 per month.
30 years requires about $735 per month.
20 years requires about $1,821 per month.
10 years would require about $5,755 per month. (Which is above the maximum 401k contribution limits unless you are self-employed and older than age 50).
5 years require about $14,205 per month (which is also obviously above the contribution limits.)
(The important thing to note here is, the earlier you start investing in your 401k, the easier it will be to become a 401k millionaire)
5) Don't Make The Mistake Of Raiding Your 401k - Raiding your 401k when times get tough will significantly reduce your chance of achieving financial freedom. You will also get hit with taxes and penalties on withdrawals.
Follow these 5 simple steps, stay out of debt, live within your means, and you will be well on your way to becoming a real-life 401k millionaire.
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Without having the option of an employer sponsored retirement plan, you can contribute to a Traditional Individual Retirement Account (IRA) and/or a Roth Individual Retirement Account (Roth IRA), which are both “similar” in nature to the 401k. The IRA and Roth IRA can be opened at most banks or at a brokerage firm like Fidelity Investments.