If you are looking for the best way to become a millionaire without having to buy the lottery every week, you should know about the 401 (k) retirement plan. In the U.S more than 133,000 people have $ 1 million or more in their 401 (k) retirement plan, according to the investment fund Fidelity Investments. So if you want to join the millionaires club, here I explain what you should do.
1. Start early
The first thing you should do is start as soon as possible, since in this way the contributions you will make to the retirement plan will be more comfortable. For example, if you start at age 25 by making monthly payments of $ 416 to your 401 (k) plan and your employer contributes half of your contributions, at age 65 you will have more than one million ($ 1,386,592).
However, if you start at age 35, you will need twice as much to reach the million dollar mark at age 65. Since, you will have to contribute $ 833 per month to your 401 (k) plan to earn enough money with interest. However, this can be more difficult to achieve, since you would have to be careful not to exceed the limit of contributions that you must make per year.
2. Know how much money your employer will contribute to the plan
You must know how much money your employer contributes to your retirement plan to calculate the amount you must invest to become a millionaire. Because if you have an annual income of $ 60,000 and start contributing 15% of your salary to the plan at age 35, you will need your employer to contribute 15% or more to your plan to have a million at age 65.
3. Expect money to grow
According to Fidelity, most people who became millionaires with the 401 (k) plan contributed 30 or more years to the retirement plan. Because of this you should keep making payments to your 401 (k) without getting discouraged, if you want to be a millionaire.
Similarly, if you change jobs, you should not withdraw funds from the 401 (k) account, since you could pay a penalty and taxes and thus lose a large part of your money.
What is 401 (k)?
The 401 (k) is a retirement savings plan that some companies offer their employees. With this plan you will make monthly contributions, which will be automatically deducted from your salary. The savings will be exempt from paying federal taxes, until the money is withdrawn from the account. In the same way, the company or company can contribute to your savings by contributing a sum of money. For example, some companies contribute 50 cents for every dollar the employee contributes to the plan. If you want more information about 401 (k) you can read this article: What is 401 (k) and what are its benefits?
Remember, becoming a millionaire is not an easy task, because if it were anyone would succeed. If you want to know other recommendations you should read this article: 4 things you must do if you want to be a millionaire and it is not to buy the lottery.
If you don’t want to join the 401 (k) retirement plan, you can consider opening an IRA retirement account to save and earn money with interest. You can consider the following accounts:
Ally Banks offers an account Certificate of Deposit IRA with an interest rate of 2.75% APY for a term of one year. For example, if you save $ 5,000 on the account then in interest you could earn $ 137 per year. The account has no maintenance fees.
In Capital One you can open a Certificate IRA Account Deposit (CD) with an interest rate of 1.00% APY. Accounts have no monthly fees and do not require a minimum deposit to open the account.