Fidelity 401K millionaires

[53anddone]

Americans are consumers not savers.

 

[exnavynuke]

In 2016, the U.S. had 4.8 million millionaires, according to the annual World Wealth Report compiled by Capgemini, a consulting firm. That’s a 7.6 percent increase from 2015, when the U.S. had 4.5 million, and a large jump from 2.5 million living in the U.S. in 2008.

Less than 2% of the country consisted of millionaires according to that report.

 

[Car-Guy]

There are 126M housholds in the US even using 3M is still less than 3% and 1.2M with a Mil, only puts it at 1%. Sounds too low to me, too.

There are 100's, maybe even 1000's, of articles out there on how many millionaire "hoseholds" there are in the US. Here's another one (current) from DQYDJ published this month.

How many US households have 1m, 2m, 3m, 4m, 5m, 10m, 50m, 100m.

Are they correct/accurate? Heck if I know, I found it on the Internet!

https://dqydj.com/how-many-millionaires-decamillionaires-america/

 

[Kelor]

Reminds me a bit of the article that once said that most millionaires drive Toyotas .

I’m pretty sure the Millionaire Next Door said they own Ford F-150 pickups. Though it’s been years since I read the book

 

[Texas Proud]

I’m pretty sure the Millionaire Next Door said they own Ford F-150 pickups. Though it’s been years since I read the book

I was watching TV today and they said the avg F-150 is now almost $50,000!!! It is not a cheap ride...

 

[REWahoo]

I was watching TV today and they said the avg F-150 is now almost $50,000!!! It is not a cheap ride...

I saw something recently that said the average profit Ford, GM and Ram realized on a full size pickup was $17K.

 

[The Cosmic Avenger]

I'm still driving a 2006 no-frills Honda Accord!

 

[SJ1_]

I think it's a totally stupid article for many reasons.

1 Many people have multiple accounts and even multiple 401(k)s and maybe never get a million in a single account.

+1
my first thought. We have more than one 401k but less than
a million in each

 

[marko]

I’m pretty sure the Millionaire Next Door said they own Ford F-150 pickups. Though it’s been years since I read the book

Wasn't quoting the book.
But F150s are as much as a Mercedes now FWIW.
Plus pickups aren't allowed in reserved parking at the club.

 

[swabby01]

I think it's a totally stupid article for many reasons.

1 Many people have multiple accounts and even multiple 401(k)s and maybe never get a million in a single account.

2. 401(k) plans have not been around that long. You can do the math yourself: If one was contributing the maximum allowed annually to a 401(k), how long would it have taken to get to $1,000,000? Don't forget that the maximum allowed was only a few thousand dollars back in the 1980s.

3. Do the math requested in question #2 for with and without various amounts of company match and for various asset allocations such as 100/0, 80/20, 60/40, 40/60, 20/80.

4. How many people stopped contributing because they decided to retire because they had enough and rolled over to an IRA?


The associated video says they "started young", but the other way to say that is "they got old" as the video said an age the client was about 60 years old for these 7-figure accounts.

The only take-away I would have is that people investing for a long time probably can get to a 7-figure portfolio. There are similar articles for TSP millionaires.

Did the math and realized the benefit 30 years ago. Yes under your definition I AM old and have a deep 7-figure portfolio. If is NOT because of the principal but because of strategic allocation into securities and NOT pulling any emergency money out. Then the gains on the securities, the dividends reinvested and the vigilance of "feed the 401K first" resulted in what should be achievable by many more than 1-2%. Seems to line up with an old mans recollection of the story of the "Ant and the grasshopper" and or "The little Red Hen"

 

[stepford]

Like most of the other responders to this post my NW is several times the value of any single account. I occasionally consider consolidating everything in one place, but my natural paranoia about eggs and baskets makes it unlikely I'll do so anytime soon.

 

[RobbieB]

I have more than a million in 1 IRA. Not at Fidelity either -

But it is a rollover of all the IRA's and 401K's I've gathered over my life. And it didn't hit a million until after I retired. And also after I turned 60.

 

[swabby01]

Agree both in principal and action

Like most of the other responders to this post my NW is several times the value of any single account. I occasionally consider consolidating everything in one place, but my natural paranoia about eggs and baskets makes it unlikely I'll do so anytime soon.

I agree with your "paranoia" and just retired after 38 years. Took my money three directions using your logic - Have a Private Client account at Fidelity, a Rollover 401K in Financial Engines and a cash / California Muni account that I manage. Each stand alone would easily cover my retirement when paired with my pension (WORKED FOR A GREAT COMPANY). Hopefully diversified enough that no matter how the world turns we are covered

 

[Housewife]

I suppose I never understood why the size of 401(k) accounts, even combined with various types of IRA accounts, could be used as a serious indicator of how well prepared people are for retirement. For one thing, those of us (e.g. housewives, who retire early, never got any chance of accumulating much in our 401k or IRA. There are limits on eligibility and contribution amounts, and there are inevitably fees and market hiccups. However, a guy making $5mm a year does not necessarily have more in his 401(k) accounts than his neighbor who makes $300k a year. But if they are equally disciplined financially, chances are that the former has a lot more stashed away in non-401k accounts and therefore better prepared financially for his retirement. On the other hand, those with low balances in 401k/IRA accounts but have a fabulous pension could conceivably be in a much better financial position than those who have no pension and just $1mm in IRA. So other than encouraging people to take advantage of tax advantages savings, why bother focusing on studying people’s 401k balances?

 

[JoeWras]

Why bother? Why bother with measuring someone's weight or temperature? They are going to die anyway.

It is a way, Housewife, of taking the temperature of the new pension-less population. Like it or not, the 401k is a replacement for the old pension. Getting a pulse on how many people are taking advantage of this benefit takes a snapshot of one component of retirement health for the next generation of retirees. I think that is all that is going on here.

Also note: the 401k is important compared to other savings vehicles because it usually has a company match benefit. The IRA or plain old savings doesn't. How many people are leaving money on the table?

You have great points too. I also chuckle a bit at some of these PR news releases. Still, I think there is some value there.

 

[MRG]

Why bother? Why bother with measuring someone's weight or temperature? They are going to die anyway.

It is a way, Housewife, of taking the temperature of the new pension-less population. Like it or not, the 401k is a replacement for the old pension. Getting a pulse on how many people are taking advantage of this benefit takes a snapshot of one component of retirement health for the next generation of retirees. I think that is all that is going on here.

Also note: the 401k is important compared to other savings vehicles because it usually has a company match benefit. The IRA or plain old savings doesn't. How many people are leaving money on the table?

You have great points too. I also chuckle a bit at some of these PR news releases. Still, I think there is some value there.

Can't manage what you can't measure.

As someone who had to.talk with 30 people every year about contributing to the 401k wow, just wow. I learned a lot. Of course those folks are still working.

 

[Housewife]

Points well taken, Joe. I understand that 401k is an important component of retirement planning, and I always think that people are doing themselves a disservice for not contributing the max to their 401k accounts (to the extent financially feasible). That said, I feel a lot of times, there is an over-emphasis on 401k, eg., as long as one does his best in contributing to/allocations in 401k, then a comfy retirement awaits. The reality is, for many people, 401k is just a small part of the financial safety net, and the retirement accounts alone will simply not be enough to sustain retirement (especially for those of us who choose to, or forced to, retire early). It is certainly necessary to educate younger folks the importance and benefits of 401k, but at the same time, it is also important to keep in mind that simply contributing the max to 401k may not be enough, depending on one’s life decisions and situations. A false sense of security is just as dangerous. If there is an opportunity to get a job with pension, do not give it up lightly. Saving outside 401k is just as important as contributing to 401k. Focus on the whole picture, rather than being overly reliant on 401k balances.

 

[JoeWras]

I totally agree Housewife.

For the researchers, it is a data point. For the population, these stories may falsely make them think: "Wow, I have $1M in my 401k. I'm good, I'm done, I've made it." Meanwhile, they have dreams requiring significantly more. They have no concept of what that number can really buy for 40 years.

I am somewhat surprised by how many people do not save outside the 401k. For the near term, I've heard way too many stories at w*rk of taking a loan against the 401k because of this. "Hey, I'm borrowing from myself... no harm." For the long term, they may have boxed themselves in when they need cash for other purposes. For example, buying a retirement home. Take a distribution for the down payment and bump up a tax bracket? Etc.

 

[RetireBy90]

Points well taken, Joe. I understand that 401k is an important component of retirement planning, and I always think that people are doing themselves a disservice for not contributing the max to their 401k accounts (to the extent financially feasible). That said, I feel a lot of times, there is an over-emphasis on 401k, eg., as long as one does his best in contributing to/allocations in 401k, then a comfy retirement awaits. The reality is, for many people, 401k is just a small part of the financial safety net, and the retirement accounts alone will simply not be enough to sustain retirement (especially for those of us who choose to, or forced to, retire early). It is certainly necessary to educate younger folks the importance and benefits of 401k, but at the same time, it is also important to keep in mind that simply contributing the max to 401k may not be enough, depending on one’s life decisions and situations. A false sense of security is just as dangerous. If there is an opportunity to get a job with pension, do not give it up lightly. Saving outside 401k is just as important as contributing to 401k. Focus on the whole picture, rather than being overly reliant on 401k balances.

ok, so we shouldn't consider 401K alone in trying to understand how prepared the population is for retirement, and we shouldn't blindly accept that if you contribute to a 401K to get the match you will have a comfortable retirement, and on and on. But measuring the balances in a 401K is easier done than trying to measure the networth of average household. It is a (one of many) indicator of how prepared the general population is for funding a retirement. The direction of movement is what is important IMHO. If the average balance moves from say $100K to $400K then the general population is doing better.

However, it doesn't say anything about an individual being financially prepared for retirement. Only a retirement budget and income statement can do that. You may have a piece of land worth $10M but only $2K income with $4K in expenses so your not prepared for retirement. If however, you have $1M in accounts to fund your retirement and have expenses of $36K per year, you should be financially prepared.

 

[jollystomper]

Also note: the 401k is important compared to other savings vehicles because it usually has a company match benefit. The IRA or plain old savings doesn't. How many people are leaving money on the table?

+1

I'm one of those lucky folks with a 401K north of $1M, and I probably could have done better than I have. I contributed to it for 35 years with a single Megacorp. I did not start maximizing my contributions until 20 years ago, so I left money on the table. Less than a quarter of its current value is due to my contributions, the rest are matching contributions and market gains on the contributions (and I never was super aggressive with its AA).

 

[NW-Bound]

An important distinction: this is number of accounts with $1+ million, not number of people. You can tell by the quote "An additional 7,667 Fidelity IRA customers clocked in with $1 million-plus account balances in the April-thru-June quarter...".

The number of people with $1+ million is higher than stated in this report because some people have a total of $1+ million divided across multiple 401k accounts, each of smaller value. Exactly how many more people this includes is unknown.

It is not unusual for people to have multiple accounts, each with $1M+, spread across different brokerage houses even.

 

[LOL!]

For the researchers, it is a data point. For the population, these stories may falsely make them think: "Wow, I have $1M in my 401k. I'm good, I'm done, I've made it."

Or maybe the population thinks, "How come I don't have a million dollars in my 401(k)?"