From Forbes
How to become a 401(k) millionaire in four easy steps
John Wasik Contributor
PERSONAL FINANCE | 2/11/2015
If it weren't for the tripwires of human behavior, becoming a millionaire would be a pretty easy path to follow.
It's mostly math and good habits.
So when I came across this piece on nowitcounts.com, a Web site for investors over 50, I saw a clear message: If you save consistently, the miracle of compound interest will make you rich.
The good news is that there's no secret as to how this works. In fact, many people have followed this path: At least 70,000 Americans are now 401(k) millionaires, a number that has doubled since 2012, according to Fidelity Investments.
How is that possible? Weren't people supposed to be out of the market and losing money in the wake of this generation's largest financial debacle?
Well, not everyone was out of the market. Millions kept putting money into their 401(k)s as the market climbed.
Stocks alone have more than doubled (as measured by the S&P 500 index) from 2009 through 2014 -- up 168% with dividends reinvested.
That's an 18% annualized return that you could've roughly achieved by doing nothing by holding a no-brainer index fund like the SPDR S&P 500 ETF (SPY), which only charges you 0.09% annually for holding all 500 stocks in the index.
Becoming a 401(k) Millionaire
So how does the 401(k) Millionaire plan work? Here are four essential things you need to do:
1. Save 10% to 15% of Your Salary -- or More.
This is boiled down multiplication. The more you save, the sooner you'll become a millionaire.
Plus, you don't have to worry about taxes until you pull the money out at a future date. According to nowitcounts.com:
"Fidelity’s 401(k) millionaires had an average company contribution of 5 percent.
In addition, those millionaires deferred about 14 percent of their pay over the 12 years they were studied, amounting to $13,300 a year. That made their total savings rate 19 percent. IRS rules allowed people to defer up to $17,500 of their pay in a 401(k) account in 2014 and as much as $23,000 if you were 50 and older."
2. Invest in Stocks.
Let me refine this a bit: You need to invest in as many stocks as you can from all over the world.
Read more from Forbes >>
How to become a 401(k) millionaire in four easy steps
John Wasik Contributor
PERSONAL FINANCE | 2/11/2015
It's mostly math and good habits.
So when I came across this piece on nowitcounts.com, a Web site for investors over 50, I saw a clear message: If you save consistently, the miracle of compound interest will make you rich.
The good news is that there's no secret as to how this works. In fact, many people have followed this path: At least 70,000 Americans are now 401(k) millionaires, a number that has doubled since 2012, according to Fidelity Investments.
How is that possible? Weren't people supposed to be out of the market and losing money in the wake of this generation's largest financial debacle?
Well, not everyone was out of the market. Millions kept putting money into their 401(k)s as the market climbed.
Stocks alone have more than doubled (as measured by the S&P 500 index) from 2009 through 2014 -- up 168% with dividends reinvested.
That's an 18% annualized return that you could've roughly achieved by doing nothing by holding a no-brainer index fund like the SPDR S&P 500 ETF (SPY), which only charges you 0.09% annually for holding all 500 stocks in the index.
Becoming a 401(k) Millionaire
So how does the 401(k) Millionaire plan work? Here are four essential things you need to do:
1. Save 10% to 15% of Your Salary -- or More.
This is boiled down multiplication. The more you save, the sooner you'll become a millionaire.
Plus, you don't have to worry about taxes until you pull the money out at a future date. According to nowitcounts.com:
"Fidelity’s 401(k) millionaires had an average company contribution of 5 percent.
In addition, those millionaires deferred about 14 percent of their pay over the 12 years they were studied, amounting to $13,300 a year. That made their total savings rate 19 percent. IRS rules allowed people to defer up to $17,500 of their pay in a 401(k) account in 2014 and as much as $23,000 if you were 50 and older."
2. Invest in Stocks.
Let me refine this a bit: You need to invest in as many stocks as you can from all over the world.
Read more from Forbes >>
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