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A few years back, Wes Bellamy, 38, began evaluating his investment accounts while preparing to purchase a home in Charlottesville, Virginia. During this reflection, he discovered remarkable growth in his 401(k) savings.
Bellamy, who chairs the political science department at Virginia State University, had consistently saved for almost a decade and took full advantage of his employer’s matching contributions. The size of his retirement account surprised him, providing a sense of financial security as he described it as “a pleasant surprise and a nice nest egg.”
Since that time, his 401(k) has continued on an upward trajectory. “I’m at $980,000 — I’m not at a million yet, but I’m very close,” he shared.
A Rise in Millennial Millionaires
According to a recent analysis by Bankrate, millennials are often the most vocal about needing at least $1 million for a comfortable retirement. Notably, a growing number of younger individuals are starting to achieve this significant savings milestone.
Fidelity Investments reports an astonishing 400% increase in millennials with 401(k) balances exceeding $1 million within the past year, showcasing a sharp rise from around 2,000 accounts in 2023 to approximately 10,000 by late September 2024.
Typically, accumulating a seven-figure 401(k) balance is a long-term achievement, usually requiring decades of disciplined saving, which often makes it a challenging goal for younger workers.
This year’s strong market performance has contributed to boosting account sizes significantly. As of mid-December, the Nasdaq had risen by 29% year-to-date, the S&P 500 experienced a 23% increase, and the Dow Jones Industrial Average gained over 12% since January.
“Even those who have been saving for shorter periods benefitted from robust market performance,” noted Mike Shamrell, a vice president at Fidelity.
Shamrell added, “If market conditions remain favorable, we may see not just an increase in the total number of millionaires but also a wider demographic of millennials reaching that threshold.”
Financial advisor Jordan Awoye of Awoye Capital in New York believes that whether through long-term saving strategies or favorable investment landscapes, “the truth is both factors play a role.” He also emphasized that as millennials, the oldest of whom will be 44 by 2025, approach their most lucrative earning years, there is an increasing motivation to prioritize retirement savings.
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However, Awoye cautioned that achieving the million-dollar milestone “is just one aspect of planning.” With the potential for market volatility ahead, significant fluctuations in retirement balances are likely. Nevertheless, many millennials have ample time—often 20 years or more—before retirement to weather these ups and downs. He advised staying committed to investment plans despite market fluctuations, reminding savers to keep their ultimate goals in perspective.
Strategies for Becoming a 401(k) Millionaire
Certified financial planner Chelsea Ransom-Cooper, who serves a predominantly millennial clientele at Zenith Wealth Partners in New Jersey, frequently advises clients to maximize their contributions beyond the basic employer match and even strive for the maximum annual contribution allowed for 401(k) or IRA accounts.
In 2023, a mere 14% of employees managed to defer the maximum allowable amount into their 401(k)s, according to Vanguard’s 2024 How America Saves report. Ransom-Cooper highlighted this as a significant opportunity being missed.
Starting in 2025, employees will be able to defer $23,500 into workplace retirement plans, an increase from $23,000 in 2024, while the IRA contribution limit stays at $7,000.
As employer contributions continue to rise, the overall average 401(k) saving rate, combining employee and employer contributions, climbed to 12.7% in 2023 from 12.1% the prior year, as reported by the Plan Sponsor Council of America’s annual survey.
Ransom-Cooper remarked on the impact of this rise, explaining, “The additional funds contributed by employers can significantly enhance retirement accounts and assist individuals in achieving their long-term savings targets.” Although potential market downturns could pose risks in the near future, she highlighted that markets generally trend upward over time, suggesting resilience against temporary dips.
Bellamy shared his ambition to retire in 20 years, aiming to enjoy at least 15 to 20 years of financial freedom thereafter. “I want that time to live life on my terms,” he stated.
Source
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