The Rise Of 401k Millionaires: Living Large In Retirement

Due to the unrelenting rise in the stock market since 2009, more and more people are violating the Stealth Wealth Mantra and boasting over social media about how they are now 401k millionaires.

Make no doubt about it, being a 401(k) millionaire is very impressive given the maximum contribution limit has never been higher than 2019's contribution limit of $19,000. The max will continue to go up $500 every couple years or so.

Check out the historical maximum 401(k) contribution chart below.

The Rise Of 401k Millionaires

Historical 401(k) Contribution Limits

Given we know the various portfolio returns based on asset allocation in my post, How Much Investment Risk You Should Take In Retirement, one can simply do a little math to figure out roughly when someone will become a 401(k) millionaire if they are starting with $0, max out their 401(k) this year and every year after, and return the average annual return of the portfolio composition since 1926.

How long it will take you to become a 401k millionaire

401k Millionaires Are Becoming Very Common

Of course, historical returns cannot guarantee future returns, but after a 10-20 year period of investing in your 401(k), your average annual portfolio return will likely begin to mimic the historical averages. Further, if your company provides a generous 401(k) match or profit sharing plan, then you will likely be a 401(k) millionaire sooner.

Given most of you reading this post have more than $0 in your 401(k) and are older, you'll simply have to find an online compound interest calculator and input your specific results for yourself. The good thing is, all the numbers above can be considered the maximum longest amount of time it will take to get to 401(k) millionaire status in a normal market.

Let's say I'm 40 years old with $500,000 in my 401(k) and will max it out every year. I've got a 70% Equity / 30% Fixed Income portfolio and expect to earn 9.1% a year based on historical averages.

In a compound interest calculator, I'll simply input my current principal, annual addition, interest rate, and take a guess how in the Years to grow field. When the future value equals roughly $1,000,000 then I'll know about how long it will take to achieve 401(k) millionaire status.

401k Millionaire

The Median and Average 401(k) By Age In America

According to Vanguard, one of the largest money managers in the world, the average 401k plan balance was $96,495 in 2016. Given the S&P 500 rose 20% in 2017, we can guesstimate the average 401k balance at the beginning of 2018 is around $110,000 – $115,000, since most investors do not have 100% of their 401k balance in stocks.

Average 401k balance by age Vanguard

However, when we look at the median 401k plan balance, it was $24,713 at the end of 2016, or around $26,000 – $28,000 at the beginning of 2018. Here's a chart comparing the average 401k balance and median 401k balance by income and by age.

Median 401k Balance By Age

Given the sobering average and median 401(k) balances in America, we can conclude that becoming a 401(k) millionaire is quite a feat.

Ways To Become A 401k Millionaire

Since 401k millionaires are ubiquitous, you might as well join the tribe as well!

1) Always max out your 401(k) for each year of work. There is no excuse not to reduce your taxable income by the amount of the maximum 401(k) contribution limit, especially as your income increases.

2) Seek an employer who has a health 401(k) match and profit sharing component. As you can see from the very first chart, your employer has the ability to contribute up to $36,500 to your 401k for a total employee + employer pre-tax contribution of $55,000 for 2018.

3) Invest in a risk appropriate manner. Essentially, you should take more risks while you are young with a heavier weighting in stocks, and slowly dial down risk with a higher weighting in bonds as you get older. Within stocks and bonds there are of course different types of securities to choose from. The easiest thing to invest in is the S&P 500 index and the Aggregate Bond Market index.

See: The Proper Asset Allocation Of Stocks And Bonds By Age

4) Work for as long as possible for an employer who has a great 401k program. Longevity really is key. I worked for 13 years for two employers and got my 401(k) balance up to $400,000. But once I retired, I rolled over my 401(k) to an IRA. If I worked for seven more years, I probably would have achieved a $1,000,000 401(k) balance, but now it's up to me to contribute to a Solo 401(k) with the business income I've earned.

If you can follow the above steps, I'm confident that you too can become a 401(k) millionaire in your lifetime. The below is my proprietary 401k savings targets by age chart I've created for you to use as a guideline.

401k savings targets by age
Click to learn more about the methodology

From the results, we can see that even after 38 years of consistent saving, you'll have around $1,000,000 to $5,000,000 in your 401k in a realistic cycle of bull and bear markets. Not bad! Just don't forget to also save and invest in an after-tax investment account so you have some funds to access if necessary. You cannot withdraw from your 401(k) penalty-free until the age of 59.5.

You've only got one life to live. Might as well retire rich and happy!

Become A Real Estate Millionaire

In addition to being one of the millions of 401k millionaires in the world, try and become a real estate millionaire as well. Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income.

With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common. Therefore, investing in real estate is smart.

Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore.

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the way to go. 

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio. 

Recommendation To Build Wealth

Sign up for Personal Capital, the web's #1 free wealth management tool to get a better handle on your finances. From there, you can eventually become one of the many 401k millionaires in the world.

In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms.

I've been using Personal Capital since 2012 and have seen my net worth skyrocket during this time thanks to better money management.

Retirement Planning Calculator

About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. was started in 2009 and is one of the most trusted personal finance sites today with over 1.5 million organic pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, The Chicago Tribune, Bloomberg and The Wall Street Journal.