In the past 12 years, the share of women with $1 million or more invested in their 401(k) has doubled, according to a Fidelity Investments report cited by the New York Times .
Fidelity oversees 401(k) accounts for around 15 million people, and 133,000 of those accounts have $1 million or more in assets. Around 20% of Fidelity’s 401(k) millionaires were women in the 2017 report, compared with just under 10% in 2005.
While saving $1 million may seem like a stretch, it is possible even for people on an average salary who start young or who save aggressively. To get an idea of what it might take for you to become a 401(k) millionaire, let’s look at what can be learned from all these new 401(k) millionaire women.
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Having a good job helps
Fidelity revealed that the average women who are 401(k) millionaires earn $287,700 annually, which is far above the median household income. However, while earning a ton of money definitely makes it much easier to become a 401(k) millionaire, Fidelity’s data showed there were plenty of men and women with $1 million or more in their 401(k)s who had incomes below $150,000.
With a typical income of around $46,000 , if you started saving around 15% of your income in a 401(k) and put away $6,900 each year for 35-years, you’d end up with $1.19 million, assuming an 8% return on investment.
If you think you need more income to become a millionaire, you can always take on a side gig or take steps to increase your income, such as advancing your education or making sure to negotiate salary and raises when you get hired at a new job.
It takes time to become a 401(k) millionaire
The millionaires with 401(k) accounts at Fidelity didn’t build up their 401(k) balances overnight. In fact, the average age of 401(k) millionaires is 58.5 for women, and 59.3 for men.
Unless you inherit, earn a ton of money, or get very lucky with your investments, slow and steady progress — and making smart money decisions over time — is the best way to build up a nest egg of $1 million or more.
As you get older and your salary goes up, you can also afford to invest more money. Fidelity data shows savings rates increase as retirement approaches: Millennials save 10.2% on average, compared with 11.7% for Gen Xers.
The good news is, when you reach age 50, you’re allowed to make catch-up contributions, which means you can invest $6,000 more in a 401(k) and $1,000 more in an IRA than the standard annual limits . If you’re reaching retirement and aren’t yet a millionaire, being able to save more money pre-tax can help you get there.
You have to invest more than 10% of your income
Becoming a millionaire on a normal income means defying the conventional wisdom that you need to save just 10% of your income for retirement.
Women with incomes under $150,000 who were 401(k) millionaires were saving an average of 18.1% of their salary. When combined with a 6.8% employer match, these women saved a total of 24.9% of total income — which is around twice as much as women overall. Male 401(k) millionaires with incomes under $150,000 were also saving much more than 10%, with a 22.8% total savings rate, including an employer match.
To save more than 10% of your own income , look for ways to cut other costs — such as driving a more affordable car and canceling unused subscriptions . You can also set up a budget, determine the maximum you can contribute to savings, and automate contributions to your 401(k) so money will be transferred automatically to your retirement account.
You need to invest in stocks
What you invest in also matters. Women with incomes under $150,000 who became 401(k) millionaires had around 77% of their portfolios invested in stocks, while male 401(k) millionaires invested 76% in stocks.
Keeping your money in stocks is key, because being too risk=averse and earning low returns makes it almost impossible to become a millionaire unless you’re earning and saving a fortune.
If you don’t know how to pick stocks , consider using a Roboadvisor such as Wealthfront or Betterment or investing in ETFs that track the market, such as iShares Core S&P Total U.S. Stock Market ( NYSEMKT:ITOT ) or the Schwab U.S. Broad Market ( NYSEMKT:SCHB ).
Becoming a 401(k) millionaire is definitely possible
While 401(k) millionaires are a small portion of the population, there’s no reason anyone with access to a 401(k) can’t become a 401(k) millionaire by starting to save as early and as much as possible.
And if you don’t have a 401(k), you can use other accounts such as an IRA to invest for your own retirement and build up a nest egg that will keep you comfortable during retirement. Just follow these tips and you’ll be on your way to having seven figures in savings.
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Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
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