The average 401(k) balance for American workers 65 and older hovered around $233,000 in 2022. Not too shabby.
For some, that might be a solid nest egg when combined with other sources of retirement income. But if you're like me, you're probably aiming for a bit more to play it safe.
Becoming a retirement millionaire may have crossed your mind. More people are reaching that goal with their 401(k)s, and you could be one step closer to joining the 401(k) millionaire club. Here are a few 401(k) strategies to consider if your employer offers a plan.
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1. Set yourself up to crush your financial goals
If your goal is to save $1 million or more for retirement, break it down into bite-sized, actionable steps that keep you excited about your progress and on track. This might include determining how much you want to contribute to your 401(k) each month or year or setting specific savings milestones along the way. Also, having a plan to tackle other financial goals -- such as paying off credit card debt or building an emergency fund -- can make it easier to set aside money in a 401(k) without getting bogged down.
2. Get the 411 on your 401(k)
Read your 401(k) plan documents to get up to speed on your investment options, fees, and rules. It's also important to look into details like your 401(k) plan's vesting schedule , which is the time required for your employer's matching contributions to become fully yours. Quite frankly, it might be a lot harder for you to justify contributing dollars for future savings and working toward a seven-figure 401(k) if you have no idea how your plan works.
3. Snag your employer match
Your employer's 401(k) plan could be your ticket to some extra retirement cash. Many employers offer a 401(k) match , which is essentially free money added to your retirement savings. For instance, if your employer matches 50% of your contributions up to 6% of your salary and you earn $100,000 annually, they'll chip in an extra $3,000 if you contribute $6,000 (6% of your salary).
4. Maximize your contributions
Each year, there's a limit on how much you can stash away in your 401(k). For 2024, the contribution limit is $23,000 if you haven't turned 50 yet, which works out to roughly $1,917 per month if you contribute evenly throughout the year. However, you can also choose to contribute just enough to receive your full employer match if that's your goal. Review your finances and long-term goals to find the right balance between crushing your retirement goals and managing your monthly expenses.
5. Don't be afraid of getting older
If you're 50 or older and haven't saved as much as you'd like, you can tap into retirement savings perks like catch-up contributions. In 2024, the IRS allows you to contribute an extra $7,500 to your 401(k), bringing your maximum contribution to $30,500. The more money you're able to save, the easier it will be to check off your retirement goals.
6. Take advantage of time
While catch-up contributions can help boost your savings later in life, starting early is one of the easiest ways to lighten the pressure on your wallet. With time on your side, you won't need to contribute as much each month to reach the millionaire mark. Plus, the power of compounding will be working in your favor, so those smaller contributions you make early on can still grow into a million-dollar nest egg.
7. Live below your means
Contributing hundreds of dollars to your 401(k) twice a month isn't always easy. But if you can get a handle on your income and expenses, it becomes much more doable. Review your expenses to see where you can trim spending, and if you're increasing your income, don't let lifestyle creep sneak in and eat away at your extra money.
8. Learn more about your 401(k) investments
After you decide how much of your paycheck to contribute to your 401(k), the next step is figuring out how to invest that money to help it grow. Your investment options may be limited to a few selected funds, such as index funds and target-date funds . You'll want to make sure you're picking the right mix of assets based on your age, risk tolerance, and goals.
9. Hang in there
Investing can be a bumpy ride, with the market's ebbs and flows. Instead of getting anxious about short-term volatility -- which is a normal part of investing -- commit to sticking it out long enough to give your portfolio a chance to reach that million-dollar mark.
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