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Want to Be a Millionaire? Most Started Here

Would you believe there are currently around 10.8 million millionaires in America? (1)

That’s a lot of seven-figure retirement dreams! What’s more, the number is growing. In fact, a study released last year says that the Millionaire’s Club grew by 400,000 in 2016. Each year, hundreds of thousands of Americans are crossing the million-dollar mark and facing their future with more financial confidence than ever.

I love hearing that so many are hitting a wealth number that’s often held up as the benchmark total for a secure retirement. How did they do it? The answer might surprise you—and you probably have access to this already.

Our research into millionaire strategies showed that most in this group started their journey by investing in their company’s retirement plan.  And while that might not be the get-rich scheme you were expecting me to mention, there are some surprising reasons this strategy will elevate you to millionaire status. Let’s find out why.

Why Is the 401(k) So Powerful?

After kicking debt to the curb and saving a full emergency fund, the biggest tool for achieving millionaire status is participating in a company retirement plan. In fact, a big majority of millionaires participated in theirs. Let’s see why.

  • The power of the company match. Millionaires do not pass up free money, and neither should you. When your employer offers to match your contribution dollar for dollar at any percentage of your pay, they’re basically giving you a bonus. Leaving it on the table is like setting cash on fire. No other investment in the world promises you a 100% return on at least part of your money. If your employer offers a match, find out what percentage it is and be sure you’re investing at least that amount in your 401(k) right away when you’re ready to invest!

  • The pretax advantage. The pretax money you put into your 401(k) lowers your taxable income, which means you can invest more up front. Now, even though the 401(k) is the most common tool in the millionaire’s arsenal, you’ll definitely want to use those extra dollars in other investment opportunities I’ll go over below.

  • The tax-deferred speed-up. Time is money, especially when we’re talking about compound interest. As your 401(k) grows over time, that growth is tax-deferred. That means you’ll have more in your account to work for you.
Millionaires do not pass up free money, and neither should you. – Chris Hogan

How Millionaires Make the Best Use of Their 401(k)

When people ask me how much of their income they should be investing, I always tell them to put away at least 15% of their gross income. That amount leaves enough money from your paycheck to pay off your mortgage early and put some money away for kids’ college—as long as you start planning early. Where you put that 15% will depend on your employer’s retirement plan. Let me explain.

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For example, if you’re earning a $55,000 salary, then you need to invest $8,250 to reach 15%. Let’s say your company will match up to 3%, so that would be an initial contribution of $1,650.

If your company doesn’t offer a 401(k) match, go straight to step two.

  • The first step in a smart 401(k) strategy is investing up to the employer match if your company offers one. Remember, every dollar you don’t invest up to the match is money left on the table. Most employers won’t contribute a dime to your retirement fund unless you’re investing, too. At the same time, I don’t recommend you count any matching funds toward your goal of investing 15% of your gross income. It’s better to hit 15% each year on your own and think of any matching funds as free money that’s great to have, but not an essential part of your overall strategy.

  • Second, once you’ve invested up to your employer’s match (or if there isn’t one), your next step is to invest in a Roth IRA until you’ve hit the maximum contribution of $5,500 (or $6,500 if you’re 50 or older). A Roth IRA uses after-tax dollars, meaning it’s taken out of your paycheck after you’ve paid income taxes on it. That’s the basis of the Roth’s two big advantages. First, your money grows tax free. And second, you’ll owe no new taxes when you take out the money in retirement.

    To continue our example, let’s say you’re under 50, so you can make a maximum contribution of $5,500 to a Roth IRA. You’re now sitting at a $7,150 contribution for the year. You’re getting close to the 15% goal, but you’ve only done 13% of your income. For this example, you need to do one more thing.

  • The third step is simple. If you haven’t reached your 15% goal, go back to your 401(k) and invest the remaining percentage there. In this case it’s 2%, or $1,100. Your employer won’t match it, but it’s still getting you closer to your long-term retirement goals.

  • There’s another option you need to know about. Some companies offer a Roth 401(k). Just like a Roth IRA, the money you contribute to your Roth 401(k) grows tax free. But keep in mind that unlike the Roth IRA, with a Roth 401(k) you usually do have to pay taxes on the money your employer contributes.

If your employer offers this option, go ahead and place your entire 15% in it! It’s kind of like rolling all three steps into one convenient move. One caveat: be sure the mutual funds in your Roth plan have a long history of outperforming the average mutual fund.

Once you’ve invested 15% of your income in the best combination of tax-advantaged and/or employer-matched retirement plans, it’s time to let compound interest do its work! This is one of the most exciting parts of your millionaire journey. As time goes by, two things will grow—your wealth and your confidence in the future.

Once you’ve invested 15% of your income in the best combination of tax-advantaged and/or employer-matched retirement plans, it’s time to let compound interest do its work. – Chris Hogan

Now there’s one more thing you need to do with your investments: Leave them alone! Let them ride the ups and downs of the market. You’ll likely come out ahead.

Related: For extra motivation, check out the latest Chris Hogan podcast, How to Invest Your Money Like Millionaire.

Millionaires-in-Training: The #1 Source Employees Learn About Retirement From

I surprised you when I said there are millions of millionaires in America. What might surprise you even more is how many workers look to their employers for financial education and guidance toward a health retirement. In the course of researching wealth, I’ve found that the number one source people look to for retirement education is their employer. And here’s why I really love financial wellness workplace programs. When workers feel confident about their retirement prospects, it’s a win-win for businesses—both employers and employees get big benefits.

What Employers Should Know

If you’re an employer, your workers’ million-dollar nest eggs could depend on you. And why not—you’re the source of their primary income. It only makes sense to educate them about it as well. In fact, most employers are realizing how doing just that not only helps employees become millionaires, but also can actually help the company’s bottom line. That happens in a number of ways.

As employees learn good money habits, they leave behind debt and the paycheck-to-paycheck lifestyle and become more confident and engaged on the job. They spend less time solving financial issues and more energy focused on their work. Many businesses see a drop in absenteeism and fewer employees taking out loans from their company retirement plans.

Financial wellness is a relatively new benefit in the marketplace, but one that’s making an impact on both employers and employees. It means more than just offering a 401(k) or an annual seminar on investing. True financial wellness means guiding employees through the basics of budgeting, debt elimination, emergency funds and long-term wealth building.

What Employees Should Know

If you’re an employee, what does this mean for you? Does your company offer a financial wellness benefit? If so, you should definitely take advantage of it. You have to be intentional about your finances and your retirement education. In addition, be sure you're working with a qualified investing professional who can help you stay true to your plan.

Want to learn more about retiring a millionaire? Be the first to find out about my new book, Everyday Millionaires: How Ordinary People Built Extraordinary Wealth – and How You Can Too. Join the wait list to be the first to pre-order my new book when it launches this fall!

Bringing Financial Wellness to Your Company

If your company doesn’t offer a financial wellness benefit, it’s easy to launch a program that will meet the needs of you and your team when it comes to your finances. I recommend a program called SmartDollar—the on-demand video lessons and content feature teaching from yours truly along with several other money experts. Whether you’re an employee or employer, if you’d like more information on SmartDollar for your leadership team, visit


Chris Hogan

About the author

Chris Hogan

Chris Hogan is a two-time #1 national best-selling author, financial expert and host of The Chris Hogan Show. He is a frequent guest on Fox News, Fox Business, Yahoo! Finance and the Rachael Ray Show. Since 2005, Chris has served at Ramsey Solutions, where he gives practical money advice on retirement, investing and building wealth. Learn More.

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