401k millionaire

You may have heard that 168,000 of the 401k plan participants that Fidelity works with have $1 million or more in their 401k accounts making each one a 401k millionaire.

And you may have thought, why not me? What would I need to do to become a 401k millionaire?

Read on to learn how you, too, can become a 401k millionaire.

This is how much you need to save to become a 401k millionaire

MarketWatch published a table entitled, “What If You Maxed Out Your 401(k)”, that provides all the information you need on how much to save and what you need to earn to become a 401k millionaire by the time you reach age 65.

If you are able to max out your 401k contributions each year (the example assumes $18,500 in annual contributions) and allocate your account balance correctly to generate the returns shown, you can stop reading right here. You are on track to become a 401k millionaire.

Unfortunately, according to Vanguard, 10% or less of all 401k savers are able to max out their contributions each year. In my experience, most of the individuals who are able to max out are senior executives and business owners.

So, for the 90% of us who are left, please continue on with me.

This is what you need to give up to become a 401k millionaire

When saving money for retirement, you are embracing a fairly simple concept. Savers are choosing a lower standard of living now with the goal of saving enough money to finance a number of years of living without working. In other words, their retirement.

U.S. News ran a nice piece on what “Super Savers” sacrifice to max out their 401k plan savings each year. Drive an older car. Live in a modest home. Work in a job that pays you as much as possible. Limit travel. Don’t go out to eat a lot.

Making those sacrifices and living a savings-centered life is generally not appealing to anyone I know. Most of us don’t want to sacrifice significantly for a retirement dream we may not live long enough to experience. Besides, driving around in a clunky, old car and never going on vacation doesn’t sound like much fun.

So, for the 85% of us who remain, here is what I suggest.

For the rest of us, this is what you need to do

We aren’t Super Savers or senior executives. We want all gain and no pain. We expect a comfortable standard of living now and one just as good, or better, in retirement.

To get there, follow these steps.

1. Save as much as you can in qualified retirement plans

Many studies have shown that if you are able to add at least 15% of your gross compensation each year to your 401k plan, you will accumulate enough to fund a retirement that doesn’t require lowering your standard of living.

2. If you are married, contribute 15% for both

I talk to a lot of couples who say, “Bob, my spouse does all the heavy lifting when it comes to saving. I try to save, but I’m just not as good at it. Besides, he/she earns a lot more than I do and therefore should save a lot more.”

Your odds of saving $1 million combined are raised considerably if both you and your spouse add at least 15% of your gross compensation to your own 401k plan accounts each year.

3. Capture all the company match

Studies show that 20% of us are not receiving the maximum company matching contribution. Make sure you and your spouse contribute enough to receive your maximum company matches each year. It is silly to turn down free money.

4. Invest aggressively

If you are five or more years away from retirement, you should invest aggressively in the funds available in your 401k plan. This means allocating at least 70% to 80% to stocks.

5. Do not sell when the stock market crashes

This is the biggest stumbling block the average investor is unable to overcome on the road to becoming a 401k millionaire. Most sell out of risky investments when markets crash.

I can tell you with absolute confidence that markets will collapse in the future. Unfortunately, the vast majority of 401k participants will sell out of risky investments during these downturns with the misguided hope of preserving their account balances. They will then re-enter these same risky investments when it is safer – when markets are close to their highs again.

Buying high and selling low is the best way to avoid accumulating $1 million in your 401k plan account. And most 401k investors will likely continue to practice that approach.

The stock market will not go to zero! And it will recover. It has always done so.

I get the following question a lot from 401k plan participants: “How can you be so sure the stock market will not go to zero? I am scared of losing everything I have saved!”

If the stock market goes to zero and stays there, we all are going to have a lot more to worry about than the value of our 401k accounts. Either our country has been invaded, we have experienced a nuclear holocaust, or any one of a number of absolutely horrible things will have happened. We will all be much more concerned about where we can get food and water and not really focused on becoming a 401k millionaire.

6. Be disciplined in your approach

Contribute to your 401k plan consistently, whether markets are up or down, in good times and bad. Become emotionally detached from market fluctuations. If you are five or more years away from retirement, it does not matter what the markets did today. Stick with your allocation plan.

Unfortunately, studies show that 401k contributions decrease when the stock market falls or is going through a bear market phase.


I have had many 401(k) plan participants say to me, “Bob, I stopped contributing to the 401k plan because the market has been down so much. It’s just a bad place to invest right now.”

Of course, just the opposite is true. When the market is down 20% to 30%, stocks are on sale. And the bigger the discounts, the more interested we should be in investing in the stock market.

We all love to buy stuff when it is on sale. As long as it isn’t the stock market.

7. Do not take 401k plan loans

Taking a 401k loan is one of the worst investments you can make. And 401k loans often permanently remove assets from 401k accounts when participants default after changing jobs.

8. Don’t be afraid to get advice

You don’t have to hire an adviser and pay a fee every year (which is the biggest objection I hear to hiring an adviser). Hire an adviser and pay by the hour. In other words, hire an adviser when you need one — when you are scared or don’t understand what is happening in the markets. Hire an adviser to help you allocate your account balance. Don’t be afraid to pay for good advice.

No one understands what is happening in the markets all the time. And no one can predict the future. But hiring someone to prevent you from selling in a market crash or to help you allocate your account balance is a wise use of your money. Studies have shown that investors who work with advisers are more likely to achieve their goals.

Becoming a 401k millionaire is achievable for the majority of working Americans. Start on your path to achieving millionaire status today.


About the Author

Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton is an award-winning 401(k) investment adviser with over 30 years of experience. He has consulted with many Fortune 500 companies, including: Aon Hewitt, Apple, AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Corporation, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs, and many others. Mr. Lawton may be contacted at (414) 828-4015 or bob@lawtonrpc.com.

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC (LRPC) is a Milwaukee, Wisconsin-based independent, objective Registered Investment Adviser (RIA) providing investment advisory, fiduciary compliance, employee education, provider management and plan design services to employer retirement plan sponsors. The firm specializes in Socially Responsible Investment (SRI) strategies for retirement plans and is a pioneer in the field. LRPC currently has contracts in place to provide consulting services on nearly $475 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or bob@lawtonrpc.com or visit the firm’s website at https://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, a plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges, and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice, and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.