Most people are unprepared for retirement. They say so in the statistics. The average 401(k) plan balance in 2022 was $112,572, according to Vanguard. That barely covers two years of living expenses in many parts of the country.
401(k) Plan Retirement Investment for the Million Dollar Retirement
401(k) Plan Catch-up to Get a Million Dollar After Retirement
Sorting by age group worsens the statistics. Since young Americans have failed to save, the average Vanguard client under 35 has only $30,017 in their account. Remember these averages that imply those with huge savings skew the numbers. Fidelity Investments recently reported that 299,000 clients have over $1 million in their 401(k)s. It’s 1.4% of their accounts and up 10% from the quarter before.
Putting a million dollars in a retirement account is hard. It’s possible with just simple actions. A closer look. Only 40% of American workers contribute to their employers’ 401(k) plan. That raises the retirement gap since many workers miss out on tax benefits. To become a 401(k) plan billionaire, you must first understand and maximize the program. Discuss how to participate and maximize this program with a financial advisor, account, or employer.
READ ALSO: Authority to Unilaterally Enforce Maritime Regulations Around Palau Has Given to the US
Long Time Investments for 401(k) Plan
IRS guidelines limit employee contribution room to $22,500 in 2023. Some employees over 50 can make “catch-up” contributions, and employers can match up to a certain amount. Research how this strategy can increase your retirement. The flexible 401(k) plan lets you invest cash in any financial asset. Most businesses offer mutual funds with index, large-cap, small-cap, foreign, real estate, and bond alternatives. Most savers can become millionaires by investing in stocks. The S&P 500 returned 10.13% annually from 1957 through 2022. This double-digit growth rate has helped thousands of employees gain over a million dollars in their 401(k).
Past performance does not predict future returns. However, investors seeking long-term wealth growth should examine the stock market’s performance. Maxing out your 401(k) and stock market investments isn’t enough. Compounding only works if you invest for a long time. That means consistent dollar-cost averaging, or investing the same amount over time regardless of market conditions. Your 401(k) might reach seven digits with discipline and consistency.
READ ALSO: Student Debt Relief Continues to Be A Bipartisan And High-Profile Debate
