How to Be a Millionaire

There’s an interesting new study out from Fidelity, analyzing the performance of people in its 401(k) program. It found that 50,000 people have amassed a million dollars or more in their Fidelity 401(k). And a lot of them weren’t even high earners; 18 percent reported an average income of less than $150,000 a year.

 

Here are the traits Fidelity found were common for its 401(k) millionaires:

·         Start saving early.

·         Contribute large amounts, typically 14% of annual pay.

·         Take full advantage of company matches.

·         Allocate a significant portion of their assets to stocks — typically 88% by age 45 and 54% at 70.

 

The formula is actually pretty simple. Fidelity estimates that if you earn $40,000 and save 16 percent a year starting at age 25, get a 1.5 percent annual raise and earn a 7 percent annual return – that adds up to $1 million by age 67.