Kim Calder has been working since she was 22 and is looking forward to finally retiring this year.
For many Americans this can be a stressful time as they worry about not having enough money to see them through their later years.
But this is not the case for Kim, who is set to celebrate her 63rd birthday next month.
That’s because not only is she a so-called 401(K) millionaire, she is a 401(K) multi-millionaire with almost $4 million tucked away in retirement savings.
So how has she done it?
Kim, who is a certified public accountant living in the suburbs of Washington D.C., has been saving since she started work.
‘It’s really being consistent,’ she told DailyMail.com. ‘Start young and be consistent. There’s that old adage of it’s time in the market, not timing the market.’
Now, exclusive analysis by senior retirement advisor Robert Brokamp, of financial advice firm The Motley Fool, has revealed exactly how much Americans of every age need to put aside each month to join Kim in the 401(K) millionaire club.
Kim Calder is a 401(K) multi-millionaire with almost $4 million in retirement savings
The magic retirement savings formula
The traditional retirement age is considered to be 62 in the US, as this is when Americans can start receiving their Social Security benefits.
Someone who starts saving at the age of 22 would need to put away $325 per month throughout their career to be able to retire with $1.01 million by the time they are 62, according to Brokamp’s calculations.
This adds up to $3,900 per year – or the equivalent of 10 percent of the average salary for an American of that age.
Those with 35 years to go until they hit retirement age must put aside $500 a month – or $6,000 a year – in order to reach the millionaire benchmark.
This is just over 10 percent of the average salary for people between the ages of 25 and 34 in the US, which is just over $57,000, according to Nerdwallet.
For those who have 30 years left until retirement, the monthly saving target rises to $750 – and then again to $1,200 if you will turn 62 in 25 years’ time.
Meanwhile, a 42-year-old would need to save $1,900 a month, or $22,800 a year, and a 47-year-old would need to stash away $3,100 a month or $37,200 a year.
A 52-year-old with just 10 years remaining would need to save $5,800 a month, or $69,600 a year, the analysis revealed.
These calculations lay bare just how much more difficult it becomes to reach the millionaire milestone when you are later in life with no prior savings.
Indeed, according to Nerdwallet, the average 52-year-old has a salary of just over $62,000. That means, in theory, the annual amount they would need to save to become a 401(K) millionaire is in fact more than they would earn in a year.
Brokamp’s analysis assumes retirement investments generate an 8 percent average annual return, which is slightly below the 10 percent gains typically generated by the stock market.
Americans can be millionaires in retirement by saving as little as $325 a month, expert analysis has revealed
Which retirement plans are best?
Most workers have access to a 401(K) plan, an individual retirement account (IRA), or both.
A 401(K) is offered through an employer, and a company may match any contributions a worker makes, typically around 3 percent.
With a 401(K), account holders typically do not have the choice to invest in specific stocks, but instead choose between a list of funds that are invested in a variety of holdings.
An IRA, on the other hand, is opened by an individual through a broker or a bank and typically allows an individual to pick from more options for stocks, mutual funds and bonds.
According to data from Principal Financial Group, top savers – which are those who have saved 15 percent of their income or more – have, on average, a greater number of retirement savings account methods than other savers.
Kim, for example, has a pension from her years working for the federal government, that should provide her with around $90,000 a year.
She also has around $450,000 in IRAs, and a Thrift Savings Plan – which is the federal equivalent of a 401(K) – that was worth $2.9 million in January.
Along with a cash reserve of around $300,000, $4,000 a month in potential Social Security payments, and almost $30,000 from her ex-husband’s pension, she has liquid assets of almost $4 million.
However, she does also have 3.3 percent mortgage on her home, with monthly payments of around $3,100, and will have to make required minimum distributions (RMDs).
Robert Brokamp, senior retirement advisor at the Motley Fool, has broken down the amount savers need to stash away each month to generate a comfortable nest egg
How much should be in stocks?
Regardless of what type of accounts you have, Brokamp stressed that it is crucial to make sure you are investing aggressively enough for your age.
‘The rule of thumb used to be that you would subtract your age from 110, and that is the percentage of your portfolio that should be invested in stocks,’ Brokamp told DailyMail.com.
‘But now because people are living longer, people actually recommend 120 minus your age should be in stocks.’
For example, if you are aged 40, approximately 80 percent of your portfolio should be made up of stocks, while 20 percent should be reserved for bonds and other more conservative investments.
The thinking behind this theory is that younger investors can take greater risks as they have longer to recoup their losses.
The returns you make will also differ depending on what you invest in. A 401(K) or an IRA will offer different returns from investing in stocks alone, for example.
Kim said people should avoid being put off investing in the stock market because they are afraid of losing it as cash can be diminished by inflation.
‘It’s really important that you start as soon as you can to get in the habit of saving and keep going,’ she told DailyMail.com.
‘And as your income goes up, you need to put more in, if you’re not already maxing it out.’
Most workers have access to a 401(K) workplace plan or an individual retirement account (IRA) – or both
Americans could also consider investing in a target date fund, said Brokamp.
Major providers such as Vanguard and Fidelity offer these funds, which have an allocation of cash, bonds and stocks based on your future retirement date.
They are designed to manage risk while also growing your savings – and also automatically rebalance your portfolio as you age, becoming increasingly conservative as you get closer to retirement.
‘I think it’s always a good idea to look and see what’s in the target date funds from the big providers, because then you can see what Wall Street thinks should be a good allocation for your age,’ he said.
‘You’re basically hiring someone to manage your money at a very low cost.’
Tom Buckingham, chief growth officer at Nassau Financial, told DailyMail.com he has three simple tips for becoming a millionaire in retirement – save early, save often and save enough.
Start in your twenties if you can, he said, but know it’s never too late to save. Set aside a portion of every paycheck and do everything you can to maximize any company 401(K) match and take advantage of these ‘free’ retirement dollars.
‘I’ve encouraged many people in their 20s and 30s, including coworkers, family and friends, to contribute enough to their 401(K) to maximize their employer match,’ he said.
‘I’ve also shown how timing of savings and the rate of compound interest affect future assets to someone as young as 15 – my own daughter! It’s never too early to appreciate these concepts.’
It is crucial to make sure you are investing aggressively enough for your age in preparation for retirement
Rising number of 401(K) millionaires
In December last year, research from Fidelity revealed that the number of 401(K) millionaires in the US had soared to a record high – helped by substantial gains in the stock market.
The number of workplace retirement accounts with a balance of over $1 million jumped to 497,000 as of the end of September 2024 – up 9.5 percent from the quarter prior.
The number of IRA-created millionaires had also surged 5 percent to a record 418,111.
But Brokamp warned that $1 million is not necessarily a strong benchmark for a comfortable retirement – and should not be considered the be-all and end-all.
‘There are so many variables that will determine how much you need to have saved, including where you live, whether you have paid off your mortgage or if you will get a pension.’
In some cases, $1 million would be plenty for decades of retirement, whereas in others it would be far from it.
‘That said, if you do have $1 million you’re ahead of most Americans and that’s good news,’ he added.
In December last year, research from Fidelity revealed that the number of 401(K) millionaires in the US had jumped to a record high
Are you saving enough?
In order to get a general idea as to whether you are on track, many financial services firms, including T. Rowe Price and JPMorgan Asset Management, provide retirement savings benchmarks.
‘You should have a multiple of your household income saved before by a certain age,’ said Brokamp.
‘For example, someone who is aged 50 should have about five times their household income saved by that point.’
It is of course easier to build a robust nest egg if you start saving early.
But even if you are a later starter, it is better to begin putting money away now than to continue to delay and miss out on valuable compound interest building up your cash.
‘If you are behind, one of the best things you can do, especially if you are in the fourth quarter of your career, is just to work a little bit longer,’ he added.
‘Even if it is just on a part time basis, this will allow you to save more, let your savings grow more, and ideally delay Social Security.’
