How to Save $1,000,000 in your 401k

Welcome back to Powering Your Retirement Radio. Today we are going to talk about how to save $1,000,000 in your 401k between the ages of 30 and 60. We’ll cover strategies for maximizing your contributions, making smart investment decisions, and taking advantage of employer matching programs.

Maximizing Contributions

The first step in saving $1,000,000 in your 401k is to maximize your contributions. If you’re 30 years old, you have 30 years to save, so the earlier you start, the more you can save. The contribution limit for a 401k is $19,000 in 2022, with an additional $6,500 catch-up contribution for those over 50. Consider increasing your contribution rate by 1% each year to reach the maximum contribution limit. In my experience, you do not need to maximize your contribution from the start. Being consistent over the years yields a far better outcome.

Investment Decisions

Making smart investment decisions is key to growing your 401k balance. Start by understanding your risk tolerance and investing in a mix of low-risk, moderate-risk, and high-risk options. Consider using a diversified portfolio, which you can adjust as you near retirement age. You need help making investment decisions that align with your goals. This is where consulting a financial advisor is something to consider.

Employer Matching Programs

Many employers offer matching contributions to 401k plans. If your employer offers a match, make sure to contribute enough to take advantage of the full match. This is free money, so make sure to maximize this opportunity. If your employer does not offer a match, consider other savings options, such as a traditional or Roth IRA.

Compound Interest

Compound interest is a powerful tool for growing your savings. Over time, the interest you earn on your 401k contributions can compound, increasing the growth of your balance. Consider using an online calculator to see how much you can earn through compound interest over time. At some point, the amount you contribute annually will be smaller than the interest you receive.

Saving $1,000,000 in your 401k between the ages of 30 and 60 is an achievable goal with the right strategies in place. Start by maximizing your contributions, making smart investment decisions, and taking advantage of employer matching programs. By starting early and taking advantage of the power of compound interest, you can build a secure financial future for yourself and your family.

Thanks for listening, and we will talk with you again soon.

GROWTH MODEL
$1,000,000 IN 30 YEARS
	TOTAL			6.00%	END OF YEAR
AGE	ANNUAL DEPOSIT		INVESTMENT ACCOUNT	AFTER-TAX EARNINGS	INVESTMENT ACCOUNT
30					$0
31	$10,000		$10,000	$600	10,600
32	$10,000		20,600	1,236	21,836
33	$10,000		31,836	1,910	33,746
34	$10,000		43,746	2,625	46,371
35	$10,000		56,371	3,382	59,753
36	$11,000		70,753	4,245	74,998
37	$11,000		85,998	5,160	91,158
38	$11,000		102,158	6,129	108,288
39	$11,000		119,288	7,157	126,445
40	$11,000		137,445	8,247	145,692
41	$12,000		157,692	9,462	167,153
42	$12,000		179,153	10,749	189,902
43	$12,000		201,902	12,114	214,017
44	$12,000		226,017	13,561	239,578
45	$12,000		251,578	15,095	266,672
46	$14,000		280,672	16,840	297,513
47	$14,000		311,513	18,691	330,203
48	$14,000		344,203	20,652	364,856
49	$14,000		378,856	22,731	401,587
50	$14,000		415,587	24,935	440,522
51	$15,000		455,522	27,331	482,853
52	$15,000		497,853	29,871	527,725
53	$15,000		542,725	32,563	575,288
54	$15,000		590,288	35,417	625,705
55	$15,000		640,705	38,442	679,148
56	$16,000		695,148	41,709	736,857
57	$16,000		752,857	45,171	798,028
58	$16,000		814,028	48,842	862,870
59	$16,000		878,870	52,732	931,602
60	$16,000		947,602	56,856	1,004,458*

*This is a hypothetical illustration of a 6% growth rate each year. It is to show you the effects of compounding and is not an actual investment return.