The number of 401(k) millionaires has reached another record, with Fidelity reporting 769,000 accounts worth at least $1 million.
Good.
I love stories like this because they prove something I’ve been saying for years: when it comes to retirement savings, boring works.
Most of these people didn’t become 401(k) millionaires because they found the next Nvidia, traded cryptocurrency at exactly the right moment, or discovered some secret investment strategy that nobody else knew about.
They saved. They kept saving. They stayed invested. Their employers contributed. The market went up over time.
That’s basically it.
The average employee contribution rate at Fidelity reached a record 9.6%, and when employer contributions are added, the total savings rate was 14.4%. More than 80% of participants contributed enough to receive their full employer match.
That’s the story.
I always get nervous when the retirement plan industry becomes obsessed with the latest shiny object. Crypto. Private equity. Alternative investments. Managed accounts. Whatever somebody is trying to sell this week.
Meanwhile, hundreds of thousands of ordinary participants became millionaires doing something incredibly unexciting.
They participated in their 401(k) plan.
Of course, $1 million isn’t some magical retirement number. Some people will need more and others will need less. And the average 401(k) balance is still only about $155,800, so we shouldn’t pretend every American worker is suddenly ready for retirement.
But 769,000 401(k) millionaires demonstrate what the system can accomplish.
A good 401(k) plan doesn’t need to be exciting. It needs reasonable investments, reasonable fees, good plan design, an employer willing to contribute, and participants willing to save consistently for a long period of time.
Retirement planning isn’t supposed to be exciting.
Sometimes boring is exactly what makes people rich.