A record number of Americans have accumulated $1 million or more in their 401(k) or IRA savings accounts, according to Fidelity Investments, which oversees 30 million retirement accounts.
The number of workers with $1 million or more in their 401(k) rose from 200,000 to 233,000, due to market gains and new account contributions. The number of million-dollar IRAs rose to 208,000.
So what does it take to become a retirement millionaire?
To build up a seven-figure balance, you need to participate in and make contributions to your workplace 401(k) or IRA. It may sound obvious, but there is no “magic wand” that will create millions for you if you don’t save enough in the first place.
Next, you need to make sure a good portion of your account is invested in growth investments like stocks or stock funds, which represent your stake in an expanding economy. Younger investors, with a long time horizon, typically own more stocks, while investors nearing retirement will have less. Investors buy stocks hoping they will go up in value over time. That growth will help keep you ahead of inflation, and make your money last longer in retirement.
The Takeaway: It used to be that many American workers could count on Social Security and a pension to pay the bills in retirement, but now, things have changed. Few younger workers have pensions anymore, so saving on your own for retirement, by contributing to your own 401(k) or other retirement plan, is absolutely vital if you want to maintain your lifestyle once you stop working.