Fidelity Investments, the largest provider of 401(k) plans, recently announced data on their 13 million 401(k) customers accounts that provides an insight into saving for retirement. One of the most interesting items from the report itself was the fact that 401(k) millionaires, those with $1M or more in their 401(k) account, has grown to 72,000. This is twice as many as in 2012 and fives times as many in 2004.  While I know many of my readers favor self-directed accounts and “alternative” assets as to their investments, this report offers some good insight into how to save and contribute to your retirement account so that you have funds to invest. Here are some interesting saving and contribution facts that these 401(k) millionaires had in common.

1. They Contribute the Maximum Employee Amount. These investors contribute the maximum employee amount every year and most receive the company maximum matching contribution available. While company plans and employer contributions vary, those who save more end up with more. But it isn’t just the extra money saved that ends up helping you in the long-run it is the investment growth of those additional dollars. I like to think of it this way, the more you can save and put away, the more players you can get on the field to score points. Sometimes, unfortunately, I think too many investors think they can just hit a home-run on an investment and solve all of their retirement problems but the fact of the matter is if you only have one or two players on the field it is hard to score too many runs without swinging for the fences. I can almost hear my little coach telling me, “just a base hit Mat, base hit.”

When it comes to maximizing contributions, if you are self-employed with a solo 401(k) then you can create the most generous employer matching contrinbutions possible and you can contribute far more than the average 401(k) millionaire form the Fidelity Report. According to the Fidelity report, the average total contribution (employee and employer) of a 401(k) millionaire was $35,700. Under a solo 401(k) a self-employer person could actually contribute up to $53,000 total giving them nearly $20,000 more per year to save, invest, and grow.

2. They Save For The Long-Term. I’m sure it is not shocking but these 401(k) millionaires save for the long-term and put money away steadily. According to Jeanne Thompson, VP Fidelity, “They really are heeding the right advice….Starting early and staying for the long term.”

3. They Take Advantage of Catch-Up Contributions. These investors are mostly over the age of 50 and as a result they can and DO take advantage of the ability to invest an additional $6,000 per year as a “catch-up contribution”. Even though these investors are on track financially for retirement, they still know a good deal when they see one and take advantage of the ability to put away up $24,000 a year as their employee contributions (keep in mind, those under 50 can contribute a maximum employee contribution of $18,000/yr.).

Learning how to set money aside so that you have funds to invest is nothing novel and we’ve all understood that the more you save the better off you will be but it is nice to see the data of the 401(k) millionaires backing up these assumptions.

By: Mat Sorensen, Attorney & Author of The Self Directed IRA Handbook

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