When used properly, the 401(k) can be one the easiest and simplest means to achieving millionaire status. There is no "one size fits all" strategy when it comes to investing, but there are a few things all investors should consider to make sure they are getting the most out of their 401(k)s.
Here are three secrets that have helped propel 401(k) millionaires to their financial milestones and how they can help you, too.

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1. Matching contributions
One of the most powerful wealth building features of a 401(k) is the employer match for your contributions. While not all 401(k) plans provide matching contributions, if yours does, make sure you use them to your advantage.
When an employer matches your contributions, you are essentially earning free money. And over the course of decades, this free money begins to add up.
According to the U.S. Bureau of Labor Statistics, the average employer matching contribution is up to 3.5% of your salary. Using the median U.S. income from 2022 (around $55,000), that 3.5% match would total $1,925 by the end of the year. Understandably, $1,925 isn't life-changing money, but it can play a major role on your journey to reaching a $1 million portfolio.
Assuming that your portfolio earns the market's historical average of 10% on a yearly basis, the $1,925 from your employer's contributions you get every year would add up to be worth more than $315,000 after 30 years.
Best of all, this doesn't account for your own contributions. When doing so, you would have at least double the $315,000. And to take it a step further, if your salary increases with time, it will increase how much you can contribute and also how much your employer will match.
2. Consistent and disciplined contributions
Arguably the most common theme found among 401(k) millionaires is a simple but effective approach: They made consistent contributions, no matter the size, and no matter the state of the market.
There are two parts to this secret. First, these investors took the emotion out of investing by setting up automatic contributions. This is especially useful when markets aren't performing well.
During these times, while some investors might sit on the sidelines waiting for "just the right moment," the positions in your portfolio are increasing not in value, but in size. This makes it so that when the market does take a turn for the better, your bolstered positions begin to grow in value.
Now the second part: While it can be difficult when beginning your investment journey, don't let the size of your investments deter you.
There is plenty of data proving that even when starting out with small amounts, investors who choose to begin rather than worrying about the size of their investments end up having much more valuable portfolios over the long term. Remember: You don't have to see the whole staircase to take the first step.
3. Compounding
In the pursuit of 401(k) millionaire status, one often overlooked yet crucial strategy is the understanding and harnessing of compounding. Compounding is the secret ingredient to build a millionaire portfolio.
But there is a catch: The only way compounding works is when you add some time to it.
At its core, compounding is the snowball effect of your money working not only on your initial investment but also on the accumulated returns from previous periods. Imagine you start contributing $1,000 annually to your 401(k) at the age of 25. Assuming an average annual return of 10%, here's how your money grows over time.
Year | Total Invested | Total Value |
---|---|---|
Year 1 | $1,000 | $1,100 |
Year 2 | $2,000 | $2,310 |
Year 3 | $3,000 | $3,641 |
While initially the returns seem minimal, the power of compound interest becomes even more apparent as time goes by:
Year | Total Invested | Total Value |
---|---|---|
Year 10 | $10,000 | $13,386 |
Year 20 | $20,000 | $67,275 |
Year 30 | $30,000 | $175,312 |
With an average annual return of 10%, your total balance has grown to more than $175,000 over 30 years by consistently contributing just $1,000 per year.
While $1,000 contributed annually with a 10% return won't get your portfolio to the million-dollar mark in 30 years, it goes to show just how impactful compound interest can be when investors use time to their advantage. The earlier you start contributing to your 401(k) and remain committed to a long-term investment strategy, the more your portfolio will benefit from the power of compound interest.