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Who doesn’t want to be a millionaire?


Fidelity, one of the nation’s largest 401(k) administrators, recently announced that they now have more than 200,000 401(k) millionaires. That’s a significant increase from the 3rd quarter of 2017 when there were 133,000.

In and of itself, this is incredible and without a doubt, those households are well on their way to a comfortable retirement. If you were to look under the hood of these accounts, I’m fairly confident you’d find a wide range of investments, with a heavy emphasis on stock funds.

And while the investments held within these accounts may be varied, there are likely a few common threads among those 401(k) millionaires. 

For example, all of them began their quest with zero dollars in their accounts. They didn’t procrastinate or wait until everything was good in the world or their personal lives. Rather, they chose to put money into their retirement account every pay period -- and I emphasize “every.” You can’t count to a million without starting at one.

The results clearly indicate that, at some point, those millionaires committed to save and invest a portion of their paycheck every payday. It didn’t matter if the business headlines proclaimed a recession or a flourishing economy.

It didn’t matter what world leader was condemning our nation. Or to what political party our president belonged. These millionaires simply ignored the day-to-day news and stayed committed to their plan to save in good economic times or bad.

The key isn’t so much what investments they chose, but simply that they chose to invest. It’s highly unlikely they moved in and out of various funds based on headlines or emotions. They focused on their long-term objective and ignored the talking heads.

With the year coming to an end, now is an opportune time to review your current contribution level so that you get a strong start out of the 2020 starting gate.

For example, if you’re contributing six percent of your pay into a 401(k), consider increasing your contribution to eight or even ten percent. A few extra dollars every pay period goes a long way over a working career.

I also suggest you take a look at your investment menu. It continues to surprise me how many people don’t know what choices they’ve made.

The fact that more and more people are becoming millionaires is proof that a commitment to save and invest wisely pays off. That accomplishment, however, is somewhat mitigated by various governments, especially your Uncle Sam.

Withdrawals are treated as ordinary income, so you have to pay income tax on every penny you withdraw. In fact, when city, state and federal taxes are tallied, those new millionaires will likely pay in the neighborhood of 15 to 25 cents for every dollar they take out.

The good news, if you want to call it that, is that there are no Social Security taxes. Somewhat better news is that, if you have a Roth 401(k), no taxes are withheld at all. Of course, you’ve already paid taxes on the money before you put it into a Roth account.

Nobody knows what the investment results will be in the upcoming years. But I do know that it’s possible to become a millionaire if you take full advantage of your employer’s retirement program. Good luck.