Your retirement is likely the largest single financial goal you'll ever face in your life. Once you stop working, you'll need a way to cover your costs for the rest of your life. If all goes well, you could have to fund multiple decades of active living, without a paycheck.

As daunting as that may seem, there's one simple retirement savings hack that can help you out big time in the long run. That hack? Contribute to your 401(k) or similar employer-sponsored retirement plan, and invest the money in a broad-based, low-cost, stock-focused index fund for its long-term potential returns.

A nest egg with 401K written across the shell on top of a pile of cash.

Image source: Getty Images.

Why that's such a powerful hack

There are three major reasons why that simple strategy can be such a powerful hack for your retirement.

First and foremost, your 401(k) contributions are automatic and made directly from your paycheck. You don't have to remember to transfer money to your brokerage and manually make an investment. You don't get tempted by a big pot of money sitting in your checking account that you can spend on something else. Plus, once you get used to your post-contribution paycheck, you just might find that you don't miss the money that you're now actively socking away for your future.

Next, your 401(k) provides a tax-advantaged way to save for your future. Every dollar you have invested in your 401(k) can grow tax-deferred as long as the money stays in the plan. If you fund a traditional 401(k), your contributions are also made with pre-tax dollars, but your retirement withdrawals are taxed as ordinary income. If you fund a Roth 401(k), you do pay taxes on your contributions, but your qualified withdrawals in retirement are tax free.

Finally, there are fairly high limits on the amount you can contribute to your 401(k). In 2023, people younger than 50 can potentially sock away as much as $22,500, while the limit for those age 50 and up is $30,000. In 2024, those limits rise to $23,000 and $30,500 respectively. Those limits make it quite feasible for people who start early enough in their careers to retire as millionaires based on their 401(k) account balances alone.

Start today to boost your chances at a millionaire retirement

The table below shows how much you need to sock away each month to reach a $1 million nest egg by retirement, depending on how long you have left before you retire and what rate of return you earn. As you can see, if you start early enough and if you earn near the market's long-run historical 10% annualized rate of returns, it can be a fairly straightforward goal.

Years to Go

10% Annual Returns

8% Annual Returns

6% Annual Returns

4% Annual Returns

45

$95.40

$189.59

$362.85

$662.49

40

$158.13

$286.46

$502.14

$846.06

35

$263.40

$435.95

$701.90

$1,094.42

30

$442.39

$670.98

$995.51

$1,440.82

25

$753.68

$1,051.50

$1,443.02

$1,945.04

20

$1,316.89

$1,697.74

$2,164.32

$2,726.47

15

$2,412.72

$2,889.86

$3,438.57

$4,063.55

Table by author.

If nothing else, that table certainly shows the potential power of the simple retirement savings hack of contributing to your 401(k) and investing it in a broad-based, low-cost, stock-based index fund.

The most important part, though, is to get started soon. As that table shows, the longer you have until you retire, the less you have to sock away each month to reach your goal. You will never again have more time before you retire than you do right now. So make today the day you make it possible to put this hack into place for yourself. Once you look back on the nest egg you've built after a long career of following this simple strategy, you'll likely be very glad that you did.