How to Retire a 401K Millionaire

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This article was inspired by Rob over at Mustard Seed Money. He recently wrote about a friend of his that expected to retire with more than $1 million dollars in his 401k. This prompted Rob to do a little research.

He was curious to see at what age the typical 401k millionaire reaches that milestone. According to a Fidelity Investment report, which reviewed over 15 million Americans who have accounts with them, they reported some interesting statistics.

On average, women achieve the status of 401k millionaire at the age of 58.5. Meanwhile, the average man achieves this status at 59.3.

My Inspiration

The Fidelity statistics led me to a new thought. If 59 years old is the average age to earn 401k millionaire status, what is the gold standard? In other words, what should we compare this age against? How fast can it be done? And, this leads me to my one regret in life.

My One Reget

Okay, if you pressured me, I could probably come up with a few more regrets. Those few things I would have done differently in life. Hindsight is twenty twenty, as the saying goes. But, for the sake of keeping this blog post at a manageable length, I will keep it to just one.

I regret not maximizing my 401k contribution as soon as I started my post college professional career back in the mid 1980’s. I was a newly minted CPA working at a Big 4 public accounting firm. Making the big dough and living the big city life style was great. But, I did not maximize my 401k contribution back in that day.

My Excuses

Thinking back to that time, I can come up with lots of reasons why I didn’t maximize my 401k contribution:

401ks were not all that popular in the mid 80’s; most companies still offered defined benefit pension plans Renting an apartment and living the big city life consumed most of my salary I saved some money outside of my 401k wanting quick access to my funds I was an idiot and wanted to party like a rock star; and I do not mean Rockstar Finance SPEED TO 401k MILLIONAIRE STATUS Let’s get on to the point of this article. If the average person hits a million in their 401k at about age 59, what is the gold standard? How fast can it be done?


To figure this out we need a few assumptions. Here they are for a newly minted 2018 college graduate. We will call him Tom Junior or just Junior for short.

Mrs. DD and I do not have any children. But if we did, we think Tom would be a nice name. The picture below represents what Tom Junior might look like. We know Junior got his keen intelligence from Mrs. DD. We are not sure where he got his manly good looks and six pack abs. Tom Senior keeps his six packs in the refrigerator.

Okay, seriously now, here are the assumptions we will follow for the fictitious Tom Junior.

22 years old and earns an average annual starting salary for a college graduate of $50,000. This is based on a 2017 study by the Hay Group

The salary grows by 3% per year

He contributes the maximum allowed to his 401k, $18,500 for 2018. This is a lot to Junior, but he’s only out of pocket less than $14,000 because of the pre-tax nature of the contributions

Mrs. DD and I have an agreement with Junior. He can live at our home rent free and be on our health care plan in exchange for his agreement to maximize his 401k contribution.

There is just one house rule. Junior must not touch his father’s beer; it is strictly for his Dad’s medicinal purposes. Junior’s company contributes 3% of his base salary to his 401k account each year.

The government increases the maximum allowable contribution by 1% each year, and junior increases his contributions by that amount. Let’s be conservative and assume Junior earns investment returns of just 7% annually and the answer is: I plugged these assumptions into a spread sheet and determined junior could be a 401K millionaire at about age 42. That’s our gold standard my friends. Our speed to a million, if you will.

One more interesting point. At the age of 42, junior is only out of pocket a little over $320,000 to build his $1 million. Why? The company contribution, the tax break from Uncle Sam and the investment returns make up most of the $1 million. It is clear now that junior’s employer, the US government and the financial markets are doing most of the work. That is the beauty of the 401k!

So, what do you think?

Do you have children and could you get them to agree to this arrangement? Are you in your 20’s? If so, what do you think of this plan? Am I crazy to believe anyone would think about doing something like this? What regrets do you have? Leave a comment, join the conversation and let us all know.

This article was republished with permission from Dividends Diversify. 

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