Do you know what millionaires say is the number one tool for building wealth? Is it single stocks? Nope. How about real estate? Guess again. What about an inheritance? Not even close.
The answer, according to our National Study of Millionaires, is the 401(k). In fact, eight out of 10 millionaires said investing in their employer-sponsored retirement plan—which included 401(k)s—was their main tool for reaching millionaire status.
That’s right: The same tool that thousands of millionaires used to build their wealth is likely available to you at your workplace! Are you making the most of it?
In honor of National 401(k) Day, which is September 6, let’s take a closer look at what makes the 401(k) the perfect place to begin saving for retirement and building wealth:
That’s a pretty good deal, right? But listen to me, before you start investing in your 401(k), you need to be debt-free (everything except the house) and have an emergency fund with enough savings to cover three to six months of expenses. Why? Because you’ll be able to invest more when you don’t have any debt payments, and you won’t have to turn to a credit card or your 401(k) to repair a broken air conditioner or car engine. Those are really bad ideas!
Getting back to the 401(k) and saving for retirement, way too many Americans are getting close to retirement with nowhere near enough money saved up. Among households headed by someone over 55 years old, almost half of them (48%) have nothing saved for retirement—not a single penny. That’s not okay!
If you invested just 4% of your $50,000 income into your 401(k) from age 25 to age 65, you could have $1.2 million saved for retirement. What if your company matches that 4%? You could have $2.4 million saved for retirement. And this is assuming you never got a single raise. That’s crazy!
A lot of folks come up to me and say, Well, that sounds great, Chris, but I’m in my 50s and I have nothing saved for retirement! What am I supposed to do? Listen to me: Whether you’re 21 or 61, it’s never too early or too late to start saving for retirement. You can start right where you are.
Let’s say you just turned 50 years old and you’re worried that you don’t have enough saved for your retirement years. You’re panicked! But instead of giving up, you get really focused and save $625 every month into your 401(k) starting today. If you did that, you could have around $500,000 by the time you’re 70 years old. That’s pretty good!
The bottom line is, there’s no time to waste. It’s time to get focused. No matter what age or stage of life you’re in, you can use your 401(k) to build wealth and get closer to the retirement you’ve always dreamed of. Let’s get to work!