How to Become a 401(k) Millionaire

There is a debate that it is nearly impossible to save $1 million in a corporate qualified plan, the best known of 401(k) plans. That is a complete misconception but that does not mean that it is an effortless process. Like many heft goals, it is easier said than done and takes a considerable amount of discipline.

The “easiest” way? Start today with a zero balance, make the maximum annual pretax contribution of $18,500, generate investment returns of a mere 6 percent annually from a low-risk portfolio of 60 percent stocks and 40 percent bonds. Even without a matching contribution from your employer, in 30 years that will be worth $1,509,687.

But this assumes a decent salary, have all your basic living expenses covered, and make that maximum 401(k) contribution every year. If this is not possible, that’s understandable. After the age of 50, the maximum contribution increases by $6,000 per year. So if you are not able to make the max contribution in the early part of your year, it can be made up in the later years. A requirement of diligence must still be in plentiful supply, but it many have achieved 401(k) millionaire status.

See Barry Ritholtz, How to Become a 401(k) Millionaire, Financial Advisor, July 26, 2018.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.