In the first quarter of 2023, there were 339,000 people with more than a million in their 401(k) accounts. Just one year later, that number is at 485,000. That’s a 43% spike in people who can enjoy their golden years to the fullest. Despite how unfeasible the seven-figure number seems, a $1 million 401(k) may be within your reach. However, inching your way toward it will be much more difficult without a professional advisor, so consider booking a call with one as soon as possible. SmartAsset's free tool matches you with up to 3 financial advisors that serve your area in minutes.
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Do What 401(k) Millionaires Are Doing
Retirement saving is a hike, not a sprint. An average person with a seven-figure retirement has been contributing for 26 years. This is much easier said than done, as your 401(k) is an investment portfolio with tax benefits. And just like any investment portfolio, it can plummet in a few days. The past 26 years saw some of the biggest market crashes in modern history. When you’re hemorrhaging money for two years in a row, playing the long game takes nerves of steel, and cashing out seems like a good option. However, that’s almost certainly a mistake.
Contributions must keep flowing into your account. An average 401(k) millionaire contributes 17% of their income to their account, including employer matches. That’s a hefty sum, but the compounding effect makes it worthwhile. Achieving it through index funds is the second-best option after professional management.
Consider The Best-Performing Index Funds For 401(k)s
Index funds are a good way to grow your account while paying fees below 1%. If you go down that route, the best-performing ones are probably your best bet. In the previous 10 years, these 401(k) funds have been topping the charts:
| 401(k) Fund | 10-year average return |
| Fidelity Select Semiconductors Portfolio (ticker: FSELX) | 27.7% |
| Columbia Seligman Global Technology (CSGZX) | 20.6% |
| Vanguard Information Technology Index Admiral Shares (VITAX) | 20.3% |
| Janus Henderson Global Technology and Innovation Fund (JATIX) | 18.9% |
| Fidelity Blue Chip Growth Fund (FBGRX) | 17.5% |
An important thing to note here is that the performance of an index fund is tied to various macroeconomic winds, which change directions daily. Noticing them early on before they cancel out your three-year gains takes expertise. That’s one of many reasons why people use financial advisors. But there are many more.
Retirement Planning Should be Customized To Your Lifestyle And Goals
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Join The 1% Whose Money Is In Safe Hands
Financial advisors manage only 1% of Americans' wealth, mainly due to perception. They’re considered an expensive option and a privilege reserved only for the well-off. Also, some people simply enjoy managing their wealth themselves. However, financial advisors have been proven to add 3% or more to your annual returns on average. Over 10 years, that’s a 34.4% difference or above. They charge slightly higher fees than index funds, but it still pays off in the long run, especially because of other services that financial advisors bring to the table.
An advisor’s role isn’t only to manage your assets but also to provide other advice to maximize your retirement savings. That includes various tax-related solutions, portfolio rebalancing, and contribution levels. After all, the full scope of what a financial advisor can do for you will only become clear once you talk to one. It may become obvious you don’t need one, or it may be one of the best financial decisions of your life.
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