A 401K Millionaire Rebuttal

A few days ago I came across an article about 401 (k) and how easy it is to be a millionaire, laced with some heavy sarcasm and disbelief.  I read the article like many of the big box articles that I come across with anger in my thoughts and disbelief in my heart.  So I decided to craft a rebuttal and look at the article and research from a personal finance blogger who’s goal is to reach financial independence and retire early.  Before you launch into my rebuttal please take a read of the Fidelity article titled Five habits of 401(k) millionaires and the Fortune response titled How easy is it to become a 401 (k) millionaire?  Here’s the truth.  The good news is I got time, go ahead read both articles, if not that’s OK with me as well, i’ll be diving in to them with a smile on my face.

Let me get it out there right in the open, I am not a 401 (k) millionaire, I am currently contributing 4% of my salary to receive the company match, this percentage will go up shortly after I pay off my student loan debt. My salary is less than $150,000, during the time I have been working I have stayed with the same company, with a one year gap in between, during this one year gap I found the women I decided to marry, best year off ever right?! For a salary I’m going to use $52,000 for any calculations.  The reason is when you Google average annual income 2014, you get the below picture giving the 2013 income, because this was close enough to $52,000 I decided we would roll with it.  

52K Annual Salary

1.  Start Saving Early-Fidelity

1.  Have a job and keep the same one for more than three decades-Fortune

As you can see that’s quite a difference in statements.  The bottom line for both statements is if you want to have a million dollars by the time you re

tire, you are going to need a good number of years to save up money and have the power of compounding work for you.  30 years is a good number for compounding since it captures most people’s working lives.  The footnote Fortune uses to get you nodding your head yes is “This population had a median age of 59 and median tenure of just under 34 years”.  First let’s clear up the definition for Fidelity and  Fortune of the term median, please see below.  I don’t want to split hairs, the individuals in this study stayed with their company for 30 years, i’m good with that.


Let’s think about that for a minute, this study was completed in 2012, so 30 years before that was 1982.  Want to know what was new to the S & P 500 in 1982, Wal-Mart and Apple and the S & P 500 was trading in the low 100’s, versus today’s low 2000 mark.  What am I getting at here?  That times were different, people did not jump from company to company in hopes of a higher salary.  I mean my grandfather worked at a rivet company for 30 years and then retired on a pension, both of those things are pretty rare today unless you are a government worker in some capacity.  I believe a better takeaway is that individuals worked for 30 years to get to a million dollars, it didn’t happen overnight, it took time and a whole lot of compounding interest.  Today has changed, more people are switching jobs, but the ultimate affect is they are still working. Let’s do some math below to see how this affects today’s modern day employee.

30 years at Wal-Mart=30 years

5 years at Wal-Mart + 10 years at Target + 15 years at Apple=30 years

12 years at Wal-Mart + 18 years at Apple=30 years

Sometimes the math can be tricky so I wanted to make sure they all added up to 30 years.  So as times change and individuals switch jobs more frequently than in the past 30 years, do one thing, keep working and start saving early.

2.  Contribute a minimum of 10% to 15%-Fidelity

2.  Save a lot-Fortune

Based on what I currently contribute, that is more than doubling or tripling my current savings rate is a lot using 4% as a base of what’s normal.  Here’s the thing though, I have plenty of room to spare in my budget, I have instead decided to tackle my student loan debt before I begin making larger contributions.  Remember our salary of $52,000, well 10% of that is $5200 and 15% of that is $7800, which amounts to:

  • $100-$150 per week
  • $200-$300 per bi-weekly paycheck
  • $217-$325 per bi-monthly paycheck

When you look at those numbers (remember all pre-tax) they don’t seem like a lot of money, I mean we could be millionaires right!  15% why not save 30% or 50%, remember this is the average, let’s go big, I mean why save a million why not save a few million.  I agree with both statements we all should be saving more, because if we don’t’ save a lot, how the hell can we get to a million dollars, certainly not with magic pixie dust.


Pretty sure this is not the best way to a million dollars


3.  Meet your Employer Match-Fidelity

3.  Work for an employer who matches your contributions-Fortune

This is one that instead of taking what’s in the Fidelity research, Fortune decided to search for a survey that not only didn’t correlate with the actual habit, but instead focused on the actual percentage of the match.  Let’s look at the detail that really matters, “Today, 96% of 401(k) participants are in a plan that offers some type of employer contribution, but not all of them take full advantage of the opportunity.”  What?!?! 96% offer some sort of match that’s incredible.  So let’s not forget whatever your match may be 3%, 4%, 10%, let’s make sure your contribution meets this and reap the rewards for your 401 (k) future.  Remember if you look at the glass half empty, the glass will always be half empty.

4.  Consider Mutual Funds that Invest in Stocks-Fidelity

4.  Be Warren Buffett-Fortune

At some point you have to begin to wonder if the individual writing the article is even reading the study by Fidelity?  Well are you?  Fidelity research states that investors had an average of 75% of their investments in stocks and mutual funds, this allowed for investment gains to reach the 1 million dollar number.  The study mentions that from 2000-2012 the investors returned an average of 4.8%, while Fortune uses a 1.3% return, without any historical reference.  When you make statements like this is when a big red flag should come up.  Habit number one is to start saving early and the reason for that is because the compounding effect needs to take place, if these individuals have been working for 30 years, why would anyone care what the return is for a 12 year period, why don’t we look at the historical returns over a large period of time, instead let’s see what the S and P(SPX) returned from 1982 until 2012 or 30 years.  Well it’s 926.20%, let me write that again 926.20% or another calculator input gave me the compound annual growth rate of 9.42% adjusted for inflation.  So you don’t need to be Warren Buffet and as these 401 (k) millionaires have shown, you can just be an average Joe or Jane.

30 years

5.  Don’t Cash Out When Changing Jobs-Fidelity

5.  Don’t Borrow from your 401 (k)or cash it out-Fortune

Well let me start with the lowest hanging fruit first.  The article makes no mention of borrowing from a 401 (k), sorda like me saying you need to make money from your job, but don’t rob a bank.  I mean what in the world does that have to do with cashing out your 401 (k)?  I read the entire linked article and not even a mention of cashing out your 401 (k) when you change jobs, only mention of borrowing from your 401 (k).  I mean the author had to talk about changing jobs and cashing out your investments right?   Nope.  That’s what he leaves us with.

The point of the habit is that if you want to be a millionaire, you cannot  take money out that you have built up, you need to keep your retirement savings intact.  What most personal finance and/or financial advisers recommend moving these funds to a Rollover IRA because this provides more options to invest in.


We all want to be a millionaire in some form or fashion, the reasons behind it may be different, but everyone* wants to accumulate wealth in some form or fashion.  Today one of the main retirement vehicles is the 401 (k) and we have two choices:

  1. Invest money into our 401 (k) and realize the more we save, the more our savings will be
  2. Do not invest money into our 401 (k) and instead explain how poor of a choice this is

I could provide numbers, historical data, savings rates, and big fancy graphs.  I will not, do not want to complicate things, I want to keep things simple.  Instead I will tell you over and over to invest in your 401 (k).  Invest something, don’t let someone tell you that investing 1% doesn’t matter, because not everyone jumps in the water, some feel better dipping their toe in the water.  Eventually it is in your best interest to be in the water and yes the sooner the better, because we all want to be millionaires and a 401 (k) is one of the options to get there.  Go ahead, the water feels great, in fact I’m getting ready to jump in soon.


* I’m sure their are exceptions, but if you are reading about 401 (k) information you are probably not one of the exceptions.

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12 Responses to “A 401K Millionaire Rebuttal

  • I think the folks at Fortune were just trying to get a rise out of everyone. Clearly their points make no sense. I especially agree with you on #1… Just one year at 30 different companies still adds up to 30 years. I’m a bit dumbfounded as to how that is such a hard concept.

    I honestly think someone at Fortune got hoodwinked into publishing this article. The credibility of anything else they share is compromised in my opinion. How could they justify publishing such terrible advice??
    Mrs. Maroon recently posted…Like Bills Through the Breeze… This is the Money of Our LivesMy Profile

    • EvenStevenMoney
      3 years ago

      Yeah what’s unfortunate is that people read these big publications and instead of being excited about investing in a 401 (k) they are instead wondering what’s even the point, I’m not going to make any money. It definitely got to me at least enough to write a post about it;)

  • It stinks because when you read articles like this, the comments are usually even worse. People would prefer to complain and criticize instead of trying to move forward themselves. I don’t understand that line of thinking! Even if you just make a tiny bit of progress, isn’t that better than staying the same or not moving forward?

    If you just look at it and say, oh I’m only going make 1% interest so why bother? Seems a bit silly to go about with that perspective!
    Debt Hater recently posted…Student Loan Cost After GraduationMy Profile

    • EvenStevenMoney
      3 years ago

      I agree 100% with you DH, we are in a society if they gratification is not immediate we tend to spew out venom on the concept. Wait I need to work for 30 years, that will never happen, contribute 15%, I don’t have that kind of money, and then it’s all over because they never even get out of the gate. Getting worked up talking about it:)

  • Yep, I wrote about the same Fortune article. I really hope that the author was instructed to write about a controversial topic just to get people to read and this isn’t, in reality, the author’s true stance. The content in that Fortune article is so elementary and basic that even a rudimentary understanding of investing would prepare someone to win in a debate with this writer.
    Steve Adcock recently posted…The Friday Feast ~ The 17th of AprilMy Profile

    • EvenStevenMoney
      3 years ago

      I just hope that the bigger financial publications don’t take this same doom and gloom, please don’t try approach of 401K guidance, it’s frustrating.

  • I loved the rebuttal and I hate when I read articles like the one in Fortune. The article seems like nothing but an excuse to not save. This self-defeating crappola is what drives me nuts about these magazines (even though I have two subscriptions to two of them). What this person leaves out is that it is one’s obligation to take care of themselves and their family. They should save. They should be a mature adult and not saving and writing that it isn’t possible to get to a million is utter bs. It is irresponsible (can you tell I am mad). Thanks for the rebuttal. At least some people get it.
    jason recently posted…Financial Tip Friday: What Kind of Mortgage Should You Get?My Profile

    • EvenStevenMoney
      3 years ago

      “They should save” I agree I feel like this might have been missed entirely. It certainly can drive a man nuts reading articles this, just remember to breath, rub your ears, and say Woosah repeatedly.

  • Darn, this article from Fortune is like the Fox News of Personal Finance.
    I despise those websites with ‘authority’ in the field and access to the masses who publish misleading and controversial articles with the only goal to generate traffic, even if it goes against the interests of their readership.

    Thank you for posting an informative rebuttal!
    TheMoneyMine recently posted…Financial Independence DayMy Profile

    • EvenStevenMoney
      3 years ago

      Nice of you to say Money Mine. It’s the masses of people that I worry about when reading this, I’m not saying I have all the answers, but my recommendation to save money in your 401K rather than to say screw it i’ll never be a millionaire is much better.

  • Thank you for this rebuttal. I went to reference the Fidelity study for the class I teach on personal finance, but it’s no longer there… then I found this crap on Fortune.com….jeez. What a moron. Or at the very least, a Debbie Downer with the WORST attitude in the world! “Man who say it cannot be done should not interrupt man doing it”

    • EvenStevenMoney
      2 years ago

      Sorry for the extremely late response……There is so many things to be happy and grateful for, rather than just having a “debbie downer” attitude, agreed.

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