8 in 10 Millionaires Do This -- and Most Americans Should, Too

Want to become a millionaire? Why not borrow their money-management techniques?

Millionaires are definitely the minority in the United States, where many people live paycheck to paycheck. But it's possible to become one if you make the right financial decisions throughout your lifetime.

It can be hard to figure out what types of choices can lead you to achieve millionaire status. But recent research from Ramsey Solutions can help.

Ramsey Solutions, which is the website of personal finance guru Dave Ramsey, published a National Study of Millionaires in May 2022. More than 10,000 people responded to it, and the vast majority of those who did indicated they have one thing in common: They are investing in a particular kind of financial account.

Millionaires favor this investment account

According to the National Study of Millionaires, 8 in 10 people with a seven-figure net worth made the choice to invest in the 401(k) plan offered by their companies.

A 401(k) plan is a tax-advantaged retirement plan. Many, but not all, employers offer 401(k)s. Unlike brokerage accounts that you open yourself, you do not get to decide where to hold your 401(k). You either opt in or opt out of contributing to it, and your company has a 401(k) administrator that operates the retirement investment plan.

There are plenty of great reasons why so many millionaires invest in 401(k)s, and why using this type of account to save for the future is also a good idea for average Americans.

Aside from the fact that it can be a good idea to emulate the habits of millionaires if you hope to become one, it's worth researching the other advantages of 401(k) investing as well so you can make an informed choice about whether it's right for you.

Here's why most Americans should invest in a 401(k)

For most Americans, putting money into a workplace 401(k) is a smart choice because:

• Contributions can be made with pre-tax dollars. You do not pay taxes on money you invest in your 401(k) during the year the money is made, so each contribution to this account won't reduce your take-home pay by as much thanks to the savings you get on your tax bill. You do pay taxes on withdrawals, but that happens in retirement when you may be in a lower tax bracket.
• Contributions can be made automatically. You can sign up to have money sent directly to your 401(k) before you get paid. This ensures you don't ever miss a retirement account contribution. In some cases, you are actually opted into making these automatic contributions rather than having to sign up manually, which means that you'd have to go to some trouble to stop investing for your retirement.
• Your employer may match your contributions. If your company offers matching funds, this is free money. But it's up to you to contribute enough to get it.
• Investing in a 401(k) is easy. In general, you'll have a limited number of investment choices and may be able to opt for hands-off investing by choosing a target date fund that spreads your money around automatically into different assets appropriate to your investing timeline.

Each of these reasons are justification enough to contribute to a 401(k). So be like the majority of millionaires and start putting money into one of these accounts ASAP. Doing so could potentially set you on the path to building your own seven-figure nest egg that will offer the financial security you deserve in your retirement.