Five habits of 401(k) Millionaires

It’s easier than you think to pile up a million dollars – or more 

Although a million dollars may seem like a daunting figure, especially if you haven’t been diligent about saving, there’s good news: You don’t have to make $1 million to save $1 million.

Many individuals who are saving for retirement aim to have at least $1 million in their retirement accounts when they exit the workforce. But retirement savings aren’t a one-size-fits-all matter. Instead, the amount you’ll need depends on a variety of factors, including your lifestyle, specific financial obligations, future plans and health needs. Although $1 million may seem like a daunting figure, especially if you haven’t been diligent about saving, there’s good news: You don’t have to make a million dollars to save $1 million.

According to a recent study, the number of 401(k) plans with a balance of $1 million or more was roughly 497,000 in 2024.¹ While the circumstances of these 401(k) participants may have varied on the margins, all were average workers who followed a handful of basic principles that helped them to successfully prepare for retirement. Below, we explore five of these principles, including how you can apply them to your financial plan.

Start early. A powerful tool when it comes to saving for retirement, compound interest refers to the interest you gain on interest already earned on an investment. And the best way to take advantage of compounding is by saving and investing early on. In fact, a recent study showed that the average 401(k) millionaire started saving early and remained invested for at least 26 years.²

As you may have read in some of our other pieces, compounding in positive markets – even at a modest rate of return – can allow you to double an initial investment over a relatively short period of time.

Maximize your contributions. In 2025, employees can contribute a maximum of $23,500 to their 401(k) accounts, not counting any potential employer match. Depending on your income, maxing out your contributions may be more challenging earlier in your career. The average total savings rate for 401(k) participants, including both employee and employer contributions is about 14% of total income.³

Make the most of your match. Many employers offer to match their employees’ 401(k) contributions up to a certain percent, and failing to meet this match is like leaving free money on the table. Even if you’re not in a position to max out your 401(k) contributions, you should consider contributing the minimum amount necessary to earn your employer’s match.

Choose the optimal allocation. A 2000 study by economists Roger Ibbotson and Paul Kaplan found that asset allocation accounts for more than 90% of the variation in a portfolio’s return over time.⁴ If you’re a long-term investor, you know asset allocation has been one of the most important determinants of your investment earnings over time. Investing in growth-oriented investments can help significantly boost your retirement savings through the years.

Avoid cashing out early. As most 401(k) millionaires know, staying the course and maximizing your earnings are crucial in helping meet your long-term retirement goals. You should resist the urge to cash out early even if you change jobs. Instead, consider rolling your current 401(k) balance into your new employer’s 401(k) plan or an individual retirement account. You may also want to consider if it is advantageous to leave the assets in your former employer’s plan, if you are allowed to do so. Early withdrawals come with tax consequences and other penalties. It’s also best to avoid abandoning your investment strategy in turbulent market conditions. Most investors who cash out in a market downturn tend to miss part or all of the subsequent recovery.

Your next steps:

• Assess your progress. If you haven’t checked your 401(k) balance in a while, now is a good time to do so. Understanding where you are can help you determine a sound strategy to help you reach $1 million in savings by retirement.

• Revisit your investment strategy. Is your asset allocation consistent with your retirement savings goals? Your investment mix should reflect your growth expectations and risk tolerance, as well as your time horizon until retirement.

• Make necessary adjustments. Depending on how far you are from your retirement goals, you may need to increase your monthly contribution rate or adjust your investment mix. Working together, you and your financial advisor can navigate these decisions and help you work toward the retirement you envision.

¹ https://www.fidelity.com/about-fidelity/Q2-2024-retirement-analysis

² Washington Post Business

³ https://www.fidelityworkplace.com/s/page-resource?cId=fidelity_building_financial_futures_report

⁴ Ibbotson, Roger G. and Kaplan, Paul D., Does Asset Allocation Policy Explain 40, 90, 100 Percent Of Performance? Financial Analysts Journal, Jan/ Feb 2000, Vol. 56, No. 1. Available at SSRN: https://ssrn.com/abstract=279096

Sources: cnbc.com; fidelity.com; Ibbotson, Roger G. and Kaplan, Paul D., Does Asset Allocation Policy Explain 40, 90, 100 Percent Of Performance? Financial Analysts Journal, Jan/Feb 2000, Vol. 56, No. 1. Available at SSRN: https://ssrn.com/abstract=279096

Investing involves risk, and investors may incur a profit or a loss. Past performance may not be indicative of future results. Withdrawals from tax-deferred accounts may be subject to income taxes, and prior to age 59 1/2 a 10% federal penalty tax may apply. Diversification and asset allocation do not ensure a profit or protect against a loss. Holding investments for the long term does not ensure a profitable outcome. The foregoing is not a recommendation to buy or sell any individual security or any combination of securities.