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Want to Be a Millionaire? Most Started Here

Would you believe there are currently around 10.8 million millionaires in America? (1)

That’s a lot of seven-figure retirement dreams! What’s more, the number is growing. In fact, a study released last year says that the Millionaire’s Club grew by 400,000 in 2016. Each year, hundreds of thousands of Americans are crossing the million-dollar mark and facing their future with more financial confidence than ever.

It's encouraging to hear that so many are hitting a wealth number that’s often held up as the benchmark total for a secure retirement. How did they do it? The answer might surprise you—and you probably have access to this already.

Our research into millionaire strategies showed that most in this group started their journey by investing in their company’s retirement plan. That's right, it's your 401(k) and not some get-rich scheme or the latest investing fad that will help you get closer to millionaire status! Let’s find out why.

Why Is the 401(k) So Powerful?

After kicking debt to the curb and saving a full emergency fund, the biggest tool for achieving millionaire status is participating in a company retirement plan. In fact, a vast majority of millionaires participated in theirs. Here are some of the reasons why:

  • The power of the company match. Millionaires do not pass up free money, and neither should you. When your employer offers to match your contribution dollar for dollar at any percentage of your pay, they’re basically giving you a bonus. No other investment in the world promises you a 100% return on at least part of your money. If your employer offers a match, find out what percentage it is and be sure you’re investing at least that amount in your 401(k) right away when you’re ready to invest!

  • The pre-tax advantage. The pre-tax money you put into your 401(k) lowers your taxable income, which means you can invest more up front. Now, even though the 401(k) is the most common tool in the millionaire’s arsenal, you’ll definitely want to use those extra dollars in other investment opportunities we’ll talk about a little later.

  • The tax-deferred speed-up. Time is money, especially when we’re talking about compound interest. As your 401(k) grows over time, that growth is tax-deferred. That means you’ll have more in your account to work for you.

How Millionaires Make the Best Use of Their 401(k)

How much of your income should you be investing? We recommend that you invest at least 15% of your gross income for retirement. That amount leaves enough money from your paycheck to pay off your mortgage early and put some money away for kids’ college—as long as you start planning early. How you invest that 15% will depend on your employer’s retirement plan.

For example, if you’re earning a $55,000 salary, then you need to invest $8,250 to reach 15%. Let’s say your company will match up to 3%, so that would be an initial contribution of $1,650.

If your company doesn’t offer a 401(k) match, go straight to step two.

  • The first step in a smart 401(k) strategy is investing up to the employer match if your company offers one. Remember, every dollar you don’t invest up to the match is money left on the table. Most employers won’t contribute a dime to your retirement fund unless you’re investing, too. At the same time, we don’t recommend you count any matching funds toward your goal of investing 15% of your gross income. It’s better to hit 15% each year on your own and think of any matching funds as free money that’s great to have, but not an essential part of your overall strategy.

  • Second, once you’ve invested up to your employer’s match (or if there isn’t one), your next step is to invest in a Roth IRA until you’ve hit the maximum contribution of $6,000 (or $7,000 if you’re 50 or older). A Roth IRA uses after-tax dollars, meaning it’s taken out of your paycheck after you’ve paid income taxes on it. That’s the basis of the Roth’s two big advantages. First, your money grows tax free. And second, you’ll owe no new taxes when you take out the money in retirement.

    To continue our example, let’s say you’re under 50, so you can make a maximum contribution of $6,000 to a Roth IRA. You’re now sitting at a $7,650 contribution for the year. You’re getting close to the 15% goal, but you’ve only done 14% of your income. For this example, you need to do one more thing.

  • The third step is simple. If you haven’t reached your 15% goal, go back to your 401(k) and invest the remaining percentage there. In this case it’s 1%, or $600. Your employer won’t match it, but it’s still getting you closer to your long-term retirement goals.

  • There’s another option you need to know about. Some companies offer a Roth 401(k). Just like a Roth IRA, the money you contribute to your Roth 401(k) grows tax free. But keep in mind that unlike the Roth IRA, with a Roth 401(k) you usually do have to pay taxes on the money your employer contributes.

If your employer offers this option, go ahead and place your entire 15% in it! It’s kind of like rolling all three steps into one convenient move. One caveat: be sure the mutual funds in your Roth plan have a long history of outperforming the average mutual fund.


How much will you need for retirement? Find out with this free tool!

Once you’ve invested 15% of your income in the best combination of tax-advantaged and/or employer-matched retirement plans, it’s time to let compound interest do its work! This is one of the most exciting parts of your millionaire journey. As time goes by, two things will grow—your wealth and your confidence in the future.

Now there’s one more thing you need to do with your investments: Leave them alone! Let them ride the ups and downs of the market. You’ll likely come out ahead.

Millionaires-in-Training: The #1 Source Employees Learn About Retirement From

Were you surprised when we told you earlier that there are millions of millionaires in America? What might surprise you even more is how many workers look to their employers for financial education and guidance toward a health retirement. In the course of researching wealth, we’ve found that the number one source people look to for retirement education is their employer. And many workplaces have financial wellness workplace programs to help. Workers feel confident about how to handle money and plan for retirement. These programs are a win-win for businesses—because both employers and employees get big benefits.

What Employers Should Know

If you’re an employer, your workers’ million-dollar nest eggs could depend on you. And why not—you’re the source of their primary income. It only makes sense to educate them about it as well. In fact, most employers are realizing how doing just that not only helps employees become millionaires, but also can actually help the company’s bottom line. That happens in a number of ways.

As employees learn good money habits, they leave behind debt and the paycheck-to-paycheck lifestyle and become more confident and engaged on the job. They spend less time solving financial issues and more energy focused on their work. Many businesses see a drop in absenteeism and fewer employees taking out loans from their company retirement plans.

Financial wellness is a relatively new benefit in the marketplace, but one that’s making an impact on both employers and employees. It means more than just offering a 401(k) or an annual seminar on investing. True financial wellness means guiding employees through the basics of budgeting, debt elimination, emergency funds and long-term wealth building.

What Employees Should Know

If you’re an employee, what does this mean for you? Does your company offer a financial wellness benefit? If so, you should definitely take advantage of it. You have to be intentional about your finances and your retirement education. In addition, be sure you're working with a qualified investment professional who can help you stay true to your plan.

Bringing Financial Wellness to Your Company

If your company doesn’t offer a financial wellness benefit, it’s easy to launch a program that will meet the needs of you and your team when it comes to your finances. We recommend a program called SmartDollar—the on-demand video lessons and content feature teaching from yours truly along with several other money experts. Whether you’re an employee or employer, if you’d like more information on SmartDollar for your leadership team, visit

This article provides general guidelines about investing topics. Your situation may be unique. To discuss a plan for your situation, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros. 

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About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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