The United States is in an enviable position, having produced more millionaires than anywhere else on the planet. A fourth-quarter report from Fidelity Investments, a significant 401(k) plan provider, found that 401(k) balances exceeding $1,000,000 had grown 21 percent in the fourth quarter to a record 422,000 participants. Account holders exceeding this threshold had grown 41 percent for the year. According to the report, the average account balance for this fortunate segment was $1,551,300.
A combination of favorable market conditions, stronger plan savings rates, and higher overall wages had assisted in attaining these record balance levels. Fidelity reported that 37 percent of 401(k) participants increased their contributions last year. To put things in perspective, the average 401(k) balance across all participants was $118,000, and average savings rates were nearing 14 percent across all participants, according to Fidelity. If you have less than the average balance, don't fret. It's just a reminder to get serious about your finances.
If you wonder how long it will take to grow your account into a seven-figure behemoth, use your 401(k) plan's retirement calculator. For example, you are 40, have $118,000 in your 401(k), and want to surpass the seven-figure mark in 20 years. Based on a hypothetical long-term market return of 7.5 percent, you would need to save $875 monthly in your 401(k) to hit the magical million-dollar number on your 60th birthday. The good news is that your contribution amount of $875 can be offset or enhanced by any employer contributions you receive.
Patience and time in the market are your friends for those currently saving for retirement. Market volatility in the years ahead will likely threaten your resolve. Keep your plan, keep your head, and seek professional help when needed. Regarding patience, Ray Kroc of McDonald's fame once quipped: "I was an overnight success all right, but 30 years is a long night!" And everyone's favorite uncle, Warren Buffett, once said, "The biggest thing about making money is time. You don't have to be particularly smart; you just have to be patient." Wishing you patience and good fortune on the financial journey ahead!