401K Millionaires are Back! Ep # 315

As retirement super savers, you all know that slow and steady wins the race. According to this Wall Street Journal article, that race is paying off again for many Americans. In the retirement headlines segment, we’ll take a look at this article. Then in the Listener Questions segment, Bret and I will discuss the merits of having one firm handle investments, taxes, and retirement planning.

Outline of This Episode

[1:42] Stock market rally
[12:27] When might having one firm handling all aspects of your financial matters might not be the best case

There are now 25% more 401K millionaires

The number of individuals with over $1 million in their 401K retirement accounts has increased by 25% this year. There were 299,000 401K millionaires at the end of 2022 and now there are around 378,000.

If you are in the million-dollar 401K club, that places you in the top 1.64% of retirement savers. The reason for the recent surge in balances is due to the rise in the stock market since the S&P 500 is up 16% from the beginning of the year.

Since the stock and bond market had both declined in 2022 the number of 401K millionaires also decreased–by 32%.

A million dollars doesn’t have the same spending power that it used to

Unfortunately, due to inflation, a million-dollar balance is no longer an indicator of wealth. However, it is still an aspiration for many retirement savers. While the million dollar mark is a great goal for many investors, it is important to plan your retirement savings goals according to inflation.

The average 401K millionaire saves at a rate higher than most Americans–17.2%. Whereas the typical baby boomer saved at an average rate of 11.5%.The median age of 401K millionaires is 59, so these accounts have grown over decades of diligent saving. In addition to an increase in 401K accounts, IRAs have increased as well.

Saving for retirement is about more than just hitting a numerical goal

The article sheds light on the dynamic relationship between stock market performance, individual saving behavior, and the evolving landscape of retirement planning. It underscores the importance of diligent saving, thoughtful investment strategies, and the need to adjust retirement savings targets in light of inflation and extended retirement lifespans. The concept of achieving a million-dollar retirement balance, while still significant, must be viewed in the context of broader economic factors and the imperative to secure a comfortable and stable retirement.

It is also important to remember that round numbers don’t make or break your retirement plans. While a million-dollar 401K is something to celebrate, a $950,000 account will likely achieve just as much buying power in retirement. While it is important to have a goal to work towards, achieving a round savings number isn’t as important as being a diligent saver who doesn’t fear a temporary decrease in the market.

Make sure to listen in to hear how you can maximize your retirement savings and stick around until the end to hear how I answer this week’s listener question.