How To Become a 401(k) Millionaire: 8 Steps Toward Success

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The 401(k) plan that your employer offers as a workplace benefit could be your ticket to riches. Just ask Fritz Gilbert, author of “Keys to a Successful Retirement: Staying Happy, Active, and Productive in Your Retired Years.” Saving in a 401(k) made him a millionaire. Gilbert started setting aside a portion of each paycheck in a 401(k) in 1985. By 2013, he had $1 million saved up so it is possible if you remain disciplined and follow a few key steps.

How To Become a 401(k) Millionaire: 8 Step Guide

A recent GOBankingRates survey shows that 37.8% of Americans believe it’s impossible to save $1 million in retirement savings. Only 10.5% are very confident they’ll reach this milestone. This belief can hold people back from planning effectively, but small, consistent steps can help you build your 401(k) balance and get closer to achieving a secure retirement.

Here are eight ways you can become a 401(k) millionaire:

1. Start saving as soon as possible
2. Take advantage of matching employer contributions
3. Focus on increasing your earnings
4. Boost savings with each pay raise
5. Max out 401(k) contributions
6. Don’t be afraid to make lateral moves in your career
7. Live frugally
8. Keep investments simple

1. Start Saving as Soon as Possible

When Gilbert got his first job out of college as a customer service representative, his employer gave him the option of saving in a 401(k). “I started saving with my very first paycheck,” he said. That’s played a key role in his ability to become a 401(k) millionaire. Here are a few key takeaways from Gilbert’s journey:

• Gilbert wasn’t earning much — just $21,500 a year — so he didn’t contribute big bucks to his 401(k) during the early years of his career. 
• Small contributions helped his balance grow to $1 million thanks to the power of compound interest. “Those early dollars are the most important because they have the most time to compound,” Gilbert said.
• Compound interest is interest calculated on the principal — the amount deposited — plus the interest that is earned. For example, you could have $1 million by age 65 if you started investing $188 per month at age 25 and earned 10% annually. 
• If you waited until age 35 to start saving, you’d have to invest $507 per month with a 10% annual return to have $1 million by age 65. “It was the earliest contributions that got me to the millionaire status,” Gilbert said.

2. Take Advantage of Matching Employer Contributions

Not only did Gilbert get started saving early, but he also contributed enough to get the full 401(k) matching contribution his employer offered. His employer offered to match 50 cents for every $1 Gilbert contributed up to 6% of his pay. So he opted to save 6% of each paycheck to get the additional 3% contribution from his employer.

“I didn’t think of it as a 50 percent return,” Gilbert said. But now he knows that contributing enough to get his employer’s full matching contribution played a big role in growing his 401(k) to $1 million.

If your employer matches your contribution, you should take advantage of this workplace benefit. After all, it’s free money, and it will help you grow your 401(k) faster. For example, if you earn $40,000 a year and contribute just 3% of your salary, but your employer offers a 50-cent match up to 6% of your deferred salary, you’re missing out on $600 in free money.

3. Focus on Increasing Your Earnings

There’s only so much you can afford to set aside in savings if you’re not earning a lot — which was the case for Gilbert when he started his career. Even with compound interest, it would be tough to save $1 million by setting aside 6% of a $21,500 annual salary plus a 3% employer match. Here’s what Gilbert did:

• He focused on increasing his earnings to save more. By going above and beyond what was expected of him, Gilbert got pay raises and promotions that doubled his salary in the first five years of his career.
• Gilbert said it would be harder now for young adults to see that sort of rapid income growth because of wage stagnation. 
• There are so many ways to increase your income now — including side hustles — that weren’t available in the 1980s when he was starting.

4. Boost Savings With Each Pay Raise

Avoiding lifestyle inflation with each pay raise was key to Gilbert’s ability to save $1 million. “I’ve seen almost everybody as they make more money spend more money,” he said. To avoid falling into that trap, he increased his 401(k) contribution with each pay raise.

For example, if he got a 3% pay increase, he would increase his 401(k) contribution by 2% and take home an extra 1%. So he got a slight boost in take-home pay but a bigger boost in his savings rate. “It’s a really good way to ramp up your 401(k) without sacrificing your lifestyle,” Gilbert said.

If you don’t think you can afford to contribute to your 401(k) now, start with your next pay raise, he said. You won’t miss the extra money you’re setting aside in savings because you’re already used to living on your pre-raise income.

5. Max Out 401(k) Contributions

By the time Gilbert was in his early 30s, he was contributing the maximum pre-tax amount allowed to his 401(k). Maxing out his contributions as soon as he could afford to help his balance grow to $1 million. As of 2025, the maximum you can contribute to a 401(k) from your paycheck before taxes are taken out is $23,500.

Gilbert’s employer also allows after-tax contributions to a 401(k) up to a maximum of $50,000. He’s been contributing that maximum amount for the past five years, he said, which has helped his balance grow beyond the $1 million mark.

6. Don’t Be Afraid to Make Lateral Moves in Your Career

Another way Gilbert increased his earnings was a willingness to make lateral career moves. It sounds counterproductive, but taking positions in his company that didn’t always come with a pay increase helped him get better promotions down the road.

That’s because by moving from department to department, he gained a better understanding of how his company worked. “It was because I made those moves that I was able to get into more senior positions,” Gilbert said.

Just keep in mind that changing jobs just for a pay raise isn’t always worth it. You might lose access to a 401(k) or workplace retirement plan in the process — especially one with an employer match. Check the vesting schedule for your matching contributions to make sure you don’t need to stay in your job for a certain period of time to receive what your employer contributed.

7. Live Frugally

Living within his means has played a key role in Gilbert’s ability to become a 401(k) millionaire. When he was starting out, he drove a $500 Subaru and lived in a basement apartment with a roommate. He’s continued to live frugally, even after getting married, having a child and climbing the career ladder. That’s allowed him to max out his 401(k) contributions to have enough to retire comfortably.

“I would much rather make minor lifestyle adjustments early than make radical lifestyle adjustments later,” Gilbert said. “If you can’t afford to save, what are you going to do when you’re 65 — live on cat food in a mobile home?”

8. Keep Investments Simple

To become a 401(k) millionaire, you don’t have to get lucky by picking a hot stock that soars. “I’ve always kept it simple,” Gilbert said.

He invested in low-cost mutual funds, primarily stock funds, in his 401(k). If your 401(k) plan offers a target-date fund or index fund, either can be a good place to start. A target-date fund adjusts your holdings of stocks and bonds automatically over time to reduce your risk as you near retirement age. An index fund tracks a major market index, such as the S&P 500, and typically has low fees.

Final Take To GO

A GOBankingRates survey found that over 40% of Americans have less than $50,000 saved in their 401(k) account. However, it’s never too late to take charge of your retirement savings. Start by focusing on small, consistent steps like maximizing contributions and taking advantage of employer matches to build your nest egg.

Cameron Huddleston contributed to the reporting for this article.

GOBankingRates surveyed 1,000, working Americans aged 21 or older who were employed and have been in their current role for at least one full year, between Nov. 16 and Nov. 22, 2024. They were asked fourteen different questions: (1) How much money do you currently have in your 401(k)?; (2) How much retirement savings do you believe the typical “middle class” American has by 65 years old?; (3) How much savings do you believe Americans will need in order to retire rich in 2025?; (4) How much do you expect to have in your 401(k) by the time you retire?; (5) What is the likelihood that you believe you can retire with more than $1,000,000 in retirement savings?; (6) How much did you contribute to your 401(k) in 2024?; (7) How much do you plan to contribute to your 401(k) in 2025?; (8) How much do you believe you need to contribute to your 401(k) in order to retire as a millionaire?; (9) Do you tend to change retirement contributions to your 401(k) during economic downtimes?; (10) Have you decreased your contributions to your 401(k) at any point within the past year?; (11) At what age did you first begin investing in your 401(k)?; (12) Have you ever consulted a financial advisor about your retirement?; (13) How well do you understand the tax implications of your current 401(k) plan?; and (14) How confident are you in your management of your 401(k)?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.

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