In 2013, Fritz Gilbert reached a goal he had worked toward for 28 years: His 401(k) hit the million-dollar mark.
This point covers in 2013, fritz gilbert reached.
Fritz Gilbert reached a goal he.
His 401(k) hit the million-dollar mark.
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With that tick to seven digits, Gilbert, who is 55, newly retired and founder of The Retirement Manifesto blog, joined an exclusive club.
This point covers with that tick to seven digits.
With that tick to seven digits.
who is 55.
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He became one of the people who hit millionaire status with their 401(k)s.
This point covers he became one of the people.
He became one of the people.
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At Fidelity Investments, which holds over 16.2 million 401(k) accounts, only 187,000 had balances of $1 million or more.
This point covers at fidelity investments, which holds over.
At Fidelity Investments.
which holds over 16.2 million 401(k) accounts.
Use one clear idea here.
That was the total at the end of September 2018.
This point covers that was the total at.
That was the total at the end.
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So how did Gilbert and the other savers do it? Slowly. Here are five keys to 401(k) millionaire success.
This point covers so how did gilbert and.
So how did Gilbert.
the other savers do it?
Read one short idea at a time.
1. Start early
There’s a barrier to building a seven-figure 401(k) balance that affects everyone.
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There's a barrier to building a seven-figure.
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Annual contribution limits put a cap on how much can be added to the account each year.
This point covers annual contribution limits put a cap.
Annual contribution limits put a cap.
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This note gives a simple step.
The 401(k) contribution limit for 2018 — $18,500, or $24,500 for those 50 or older — isn’t exactly stifling for most people.
This point covers the 401(k) contribution limit for 2018.
The 401(k) contribution limit for 2018 —.
or $24,500 for those 50 or older.
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But it does mean the path to $1 million requires an early start.
This point covers but it does mean the path.
But it does mean the path.
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Like Gilbert, the average 401(k) millionaire at Fidelity has been contributing for nearly 28 years.
This point covers like gilbert, the average 401(k) millionaire.
the average 401(k) millionaire at Fidelity.
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Starting early also gives your money more time to grow. That means you capitalize on compound interest.
This point covers starting early also gives your money.
Starting early also gives your money more.
That means you capitalize on compound interest.
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Each year, investment returns are added to your balance, and the next year’s return is based on that bigger balance.
This point covers each year, investment returns are added.
investment returns are added to your balance.
and the next year's return is based.
This part uses short plain words.
Your returns begin earning a return, in other words.
This point covers your returns begin earning a return.
Your returns begin earning a return.
in other words.
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2. Regularly increase your contributions
It’s unlikely you’ll be able to max out your 401(k) at your first job.
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It's unlikely you'll be able to max.
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One simple fact appears here.
It’s also unlikely you’ll do it every single year. That’s fine.
This point covers it's also unlikely you'll do.
It's also unlikely you'll do it every.
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Use the next short step.
Gilbert says he started by contributing 6% of his salary.
This point covers gilbert says he started by contributing.
Gilbert says he started by contributing 6%.
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Keep each choice easy to review.
Then, he increased his contribution each year by directing the majority of each salary increase into his 401(k) instead of his take-home pay.
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he increased his contribution each year.
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“It was forced scarcity — forcing ourselves to live below our means by taking increases in pay and putting them in savings,” Gilbert says.
This point covers "it was forced scarcity — forcing.
"It was forced scarcity — forcing ourselves.
putting them in savings," Gilbert says.
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Start by contributing enough to earn employer matching dollars provided by your plan. Then try to increase by 1% or 2% each year.
This point covers start by contributing enough to earn.
Start by contributing enough to earn employer.
Then try to increase by 1%.
Read the next point slowly.
3. Be patient
That compound interest referenced earlier? It starts out as a slow burn.
This point covers that compound interest referenced earlier?
That compound interest referenced earlier?
It starts out as a slow burn.
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“In 2000, my balance was at about $250,000. That’s 15 years in.
This point covers "in 2000, my balance was.
my balance was at about $250,000.
That's 15 years in.
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And yet, in not even the same amount of time — 13 years later — I was at $1 million,” Gilbert says.
This point covers and yet, in not even.
in not even the same amount.
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Keep the idea small and clear.
That’s because the bigger your balance, the bigger the effect of compound interest.
This point covers that's because the bigger your balance.
the bigger your balance.
the bigger the effect of compound interest.
Read this short guide first.
Let’s say Gilbert contributed $10,000 to his 401(k) in year one.
This point covers let's say gilbert contributed $10,000.
Let's say Gilbert contributed $10,000 to his.
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Use the next note as help.
If he earned a 6% return, he would start the next year with $10,600.
This point covers if he earned a 6% return.
If he earned a 6% return.
he would start the next year.
One simple fact appears here.
By year 15, a 6% return on $250,000 amounts to $15,000.
This point covers by year 15, a 6% return.
By year 15.
a 6% return on $250,000 amounts.
Use the next short step.
Once compound interest starts to pick up speed, you’ll see your money quickly multiply.
This point covers once compound interest starts to pick.
Once compound interest starts to pick up.
you'll see your money quickly multiply.
Keep each choice easy to review.
“Saving for retirement is something you do over your entire career,” says Meghan Murphy, vice president at Fidelity Investments.
This point covers "saving for retirement is something.
"Saving for retirement is something you.
vice president at Fidelity Investments.
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“It absolutely does not happen overnight.”
“If you’re 45 and you haven’t saved $1 million yet, that’s OK.”
This point covers "if you're 45 and you haven't.
"If you're 45.
you haven't saved $1 million yet.
Use clear words and short lines.
4. Take appropriate risk
Compound interest relies on investment returns.
If you have a long time horizon, you’ll likely have a portfolio that is heavily tilted toward stocks.
This point covers if you have a long time.
If you have a long time horizon.
you'll likely have a mix that.
Read the key fact first.
Most retirement savers do.
Stock mutual funds should also make up a meaningful part of that mix.
This point covers stock mutual funds should also make.
Stock mutual funds should also make up.
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Historically, those investments have posted higher returns than other options available through 401(k)s.
This point covers historically, those investments have posted higher.
those investments have posted higher returns.
Look at the main issue first.
Use one small step at a time.
At Fidelity, 401(k) millionaires hold on average 77% of their assets in equities, also known as stocks.
This point covers at fidelity, 401(k) millionaires hold.
401(k) millionaires hold on average 77%.
also known as stocks.
Keep the idea small and clear.
Over the past year, 86% of the growth in those accounts came from market returns; only 14% was contributions.
This point covers over the past year, 86%.
Over the past year.
86% of the growth in those accounts.
Review this short fact.
“Being invested appropriately for your age is something we’re constantly stressing,” Murphy says.
This point covers "being invested appropriately for your age.
"Being invested appropriately for your age.
Use the next note as help.
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“It’s important throughout your entire career to make sure you’re not investing too conservatively.”
This point covers "it's important throughout your entire career.
"It's important throughout your entire career.
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Your 401(k) will allow you to invest in stocks through mutual funds, which pool investor money to purchase a selection of investments.
This point covers your 401(k) will allow you.
Your 401(k) will allow you to invest.
which pool investor money to buy.
One short check can help here.
If you’re not comfortable choosing funds, you can invest your entire 401(k) in a target date mutual fund, which invests in stocks and bonds.
This point covers if you're not comfortable choosing funds.
If you're not comfortable choosing funds.
you can invest your entire 401(k).
Read the clear step below.
The fund’s allocation between the two is targeted to a retirement year, and adjusts as that time approaches.
This point covers the fund's allocation between the two.
The fund's allocation between the two.
and adjusts as that time approaches.
Use this point to stay on track.
5. Keep a lid on your account
Taking loans or early distributions from your 401(k) stunts its growth. That should be obvious.
This point covers taking loans or early distributions.
Taking loans or early distributions from.
That should be obvious.
Keep the plan easy to follow.
What often isn’t obvious? The impact of fees.
This point covers what often isn't obvious?
What often isn't obvious?
The impact of fees.
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Fees, especially expense ratios charged by mutual funds, can easily erode your return.
This point covers fees, especially expense ratios charged.
especially expense ratios charged by mutual funds.
can easily erode your return.
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A recent NerdWallet analysis found that 401(k) fees can add up to a lifetime cost of over $200,000, not including lost investment returns.
This point covers a recent nerdwallet analysis found.
A recent NerdWallet analysis found that 401(k).
not including lost investment returns.
Use one small step at a time.
Keep fees down by choosing low-cost investments, with expense ratios under 0.5%, if possible.
This point covers keep fees down by choosing low-cost.
Keep fees down by choosing low-cost investments.
with expense ratios under 0.5%.
Keep the next move simple.
If your plan offers only expensive funds, contribute enough to earn your employer match first.
This point covers if your plan offers only expensive.
If your plan offers only expensive funds.
contribute enough to earn your employer match.
Read the short facts in order.
Then review how to open an IRA in 4 steps.
This point covers then review how to open.
Then review how to open an IRA.
Use the key list for help.
Read this short point first.
More From NerdWallet
Arielle O’Shea is a writer at NerdWallet. Email: aoshea@nerdwallet.com. Twitter: @arioshea.
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Arielle O'Shea is a writer at NerdWallet.
Check the main need first.
This note gives one main idea.
The article 5 Key Steps to Join the 401(k) Millionaires Club originally appeared on NerdWallet.
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The article 5 Key Steps to Join.
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