Your 401(k) can be an incredible tool when it comes to building a nest egg for your retirement. Indeed, if you leverage it well throughout your career, it can potentially be enough to make you a millionaire by the time you retire.

This raises a key question: How many years will you have to max out your contributions to your 401(k) to become a millionaire? Well, that will depend on how many years of work you have ahead of you, how quickly you want to reach that millionaire status, and what rate of return you earn along the way.

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Just one year may be enough, but it's quite risky

If you're early enough in your career, you might be able to reach millionaire status by just maxing out your 401(k) for one year -- and then waiting for compounding to work its magic. In 2022, employees under 50 will be generally able to contribute up to $20,500 to their 401(k) style retirement plans.  If you sacrifice to sock away that much for just one year, then around 41 years later, you might wake up to find out you're a millionaire. 

While that path might work, it's an incredibly risky path to get to millionaire status. There are three key reasons why it's so risky.

First, it assumes you earn 10% per year on the money. Although that's more or less in line with the market's long run average returns, there are no guarantees that stocks will deliver near that level in the future.

Second, it requires that you start really early in your career. If you're past the beginning of your career, have lower income, or are facing high life start-up costs, you might not have enough money early enough to make that plan work.

Third, it exposes you to a huge sequence of returns risk. If you happen to make that single, huge investment just before a market crash, you first have to wait for the market to recover before compounding really starts working on your behalf.

A faster and more reliable way to a $1 million retirement nest egg

Instead of that one-year sprint, what if you consistently kept up maxing out your 401(k) over several years? In that case, you'd have a much higher chance of reaching millionaire status quicker.

There are two key reasons for that. First, you'll be investing more cash overall, which gives you a bigger base to compound from. Second, you'll be smoothing out those sequence of return risks by making regular investments, thus making near term declines less impactful to your overall plan.

In addition, you can even start later in your career and still have a good shot of reach millionaire status using only your 401(k) plan. This is both because you'll be putting more money to work for you and because once you reach age 50, the 2022 401(k) contribution limit rises to $27,000. 

The table below shows how many years it will take to reach a $1 million nest egg inside your 401(k) depending on what rate of return you earn. It assumes you max out your contributions from your paycheck and that you get paid once a month.

Return Rate

Under 50 Max Out

50+ Max Out

10% annual returns



8% annual returns



6% annual returns



4% annual returns



2% annual returns



Data source: author.

All of a sudden, reaching millionaire status becomes much more feasible for a lot more people. Indeed, if you can keep up the contributions for somewhere in the neighborhood of 20 years, you'll have a very good chance of retiring a millionaire just from your 401(k).

Notice also that even earning 2% annual returns gets you to millionaire status faster than maxing out your 401(k) for one year and then simply waiting. That's what makes maxing out your 401(k) regularly over time both faster and more reliable than the one-shot approach of getting there.

Get started now

Regardless of how you get there, the reality is that investing to become a millionaire is a process that will likely take decades to achieve. The sooner you get started, the sooner you will be on a path that can get you there. Even if you can't max out your 401(k) today, by starting with what you can and building up your savings as your finances allow, you will be on a better path than had you never invested at all.

So make a commitment today to start investing for your retirement. No matter how large a nest egg you end up with when you retire, you'll be glad you socked away something to help you through your golden years.