For the third quarter, the number of 401(k) millionaires hit an all-time high of 544,000, up 9.5 percent from the previous quarter, according to Fidelity.
Number of 401(k) millionaires jumps 9.5%
The number of 401(k) accounts with a balance of $1 million or more jumped to a record 497,000 as of Sept. 30, up 9.5% from the second quarter, according to Fidelity. Similarly, the number of IRA-created millionaires increased by nearly 5% to a record 418,111.
The total number of 401(k) millionaires of all generations increased by 9.5% to 544,000 in the third quarter of 2024, up from 497,000 in the second quarter, Fidelity said. People with $1 million in an IRA, meanwhile, increased nearly 5% to 418,111 in the same period.
Turns out, the number might surprise you. According to data from the Federal Reserve and the Employee Benefit Research Institute, just 3.2% of retirees have saved over $1 million.
Probably 1 in every 20 families have a net worth exceeding $3 Million, but most people's net worth is their homes, cars, boats, and only 10% is in savings, so you would typically have to have a net worth of $30 million, which is 1 in every 1000 families.
The answer is a clear yes. Fidelity Investments, which handles 24 million 401(k) accounts, revealed in its latest quarterly report that there are almost a half a million (497,000) 401(k)-created millionaires in their system (tinyurl.com/38rnert7).
The average age of a retirement account millionaire is 59. "The key to saving for retirement is playing the long game and maintaining consistent contributions over time," Shamrell said.
Believe it or not, data from the 2022 Survey of Consumer Finances indicates that only 9% of American households have managed to save $500,000 or more for their retirement. This means less than one in ten families have achieved this financial goal.
Getting to the top 1% net worth by age is a very impressive goal. But how much money do you need to get there? Overall, to have a top 1% net worth in 2024 requires having at least $13 million according to the Federal Reserve. And in 2025, the top 1% net worth amount will likely continue to go higher due to inflation.
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
For example, if you have retirement savings of $1 million, the 4% rule says that you can safely withdraw $40,000 per year during the first year — increasing this number for inflation each subsequent year — without running out of money within the next 30 years.
To be part of the top 1% in the U.S., a household's net worth needs to be at least $13.6 million. This measure includes everything you own – homes, investments, savings – minus debts. Wealth tends to be a lot more unevenly distributed than income.
According to estimates based on the Federal Reserve Survey of Consumer Finances, a mere 3.2% of retirees have over $1 million in their retirement accounts. The number of those with $2 million or more is even smaller, falling somewhere between this 3.2% and the 0.1% who have $5 million or more saved.
Highly compensated employees (HCEs) are employees who are earning more than $155,000 in 2024, or who own more than 5% of a business. Employers can also name the top 20% of earners in the firm as HCEs, as long as they're making over $155,000 per year for 2024. 5 (For 2023, HCEs must earn at least $150,000 per year.)
But there is value, Shamrell said, in studying the habits of 401(k) millionaires, especially if you want to become one. Most 401(k) millionaires are Gen Xers or Boomers. On average, they have been saving for about 26 years and contribute more than 17% of pre-tax income to their retirement accounts.
If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.
All told, of the roughly 24 million participant accounts in the 401(k) plans for which Fidelity serves as record keeper, 544,000 of them had balances over $1 million, up from 497,000 in the second quarter.
9% of Americans have between $100,000 and $200,000 saved, and 4% have between $200,000 and $350,000 saved.
You can probably retire at 55 if you have $4 million in savings. This amount, according to conventional estimates, can reliably produce enough income to pay for a comfortable retirement.
By age 50, you should have six times your salary in an account. By age 60, you should have eight times your salary working for you. By age 67, your total savings total goal is 10 times the amount of your current annual salary. So, for example, if you're earning $75,000 per year, you should have $750,000 saved.
Happily, 401(k) millionaires do exist. There were 497,000 “401(k)-created millionaires” at the end of June, according to Fidelity Investment's Q2 2024 Retirement Analysis report. That tells you that with a little planning, a lot of savings, and a few bull markets along the way, joining the millionaire's club is doable.
Depending on the source, the percentage of people with $1 million in their 401(k) hovers between 2% and 9.1%. Fidelity Investments reports that just 2% of their 401(k) participants have hit that milestone.
Ninety-three percent of millionaires said they got their wealth because they worked hard, not because they had big salaries. Only 31% averaged $100,000 a year over the course of their career, and one-third never made six figures in any single working year of their career.