Take time to become a 401(k) millionaire

Steve Horaney has two kids in college, a home in South Lyon, Mich., and every other excuse people can roll out for not saving for retirement.

Despite that, he’s still managed to become one of the country’s 401(k) millionaires.

Horaney, 50, says he learned to sock away money with every paycheck going back to his early 20s when he started a good job at Guardian Industries in 1990. It’s worked.

“I max out my 401(k),” he said. “I always took the philosophy of paying me first and spending the rest.”

Horaney has no plans to splurge or retire immediately from his job as a vice president of membership at the Original Equipment Suppliers Association in Southfield.

“I don’t think I’m anywhere I need to be to retire” yet, he said.

Hitting that $1 million retirement savings mark often takes most of a career. There are limits to how much you can save each year in a 401(k) — and there is the potential downside of brutal bear markets, like the 2008-09 meltdown.

More time can mean more money.

A 30-year-old who makes $40,000 a year and sets aside 11 percent of pay a year could hit $1 million in 35 years — assuming the 401(k) plan includes an employer match, the investor gets a 7 percent annual return on investments and a 2 percent annual salary increase, according to a retirement calculator at Bankrate.com.

Investors received quite a boost, of course, as the Dow Jones industrial average posted one record after another in

2017. Wall Street has been on a bull market run for nine years.

Still, $1 million? The closest many will get to that number is buying a lottery ticket.

Reaching seven figures in savings is definitely not a slam dunk for most households.

About 150,000 people had $1 million or more in their 401(k) balances at Fidelity Investments as of the fourth quarter of 2017. It’s a record number and up from 93,000 for the fourth quarter of 2016.

It’s also less than 1 percent of 16 million 401(k) accounts.

The average 401(k) balance at Fidelity reached $104,300 with the average IRA balance reaching $106,000 — both record highs.

But many people have far less than that in retirement savings. The median value for retirement accounts — including a mix of IRAs and 401(k) s from current and past jobs — was $60,000 in 2016, according to the Federal Reserve Board’s Survey of Consumers.

Savers who reach the millionaire milestone tend to set aside money consistently, don’t run scared in a down market and avoid taking out loans from their 401(k) plans.

It helps to have a steady, fairly high-paying job, work at a large company with a generous matching contribution into that 401(k) and time to build up to millionaire status.

Perhaps not surprisingly, the typical 401(k) millionaire is about 58 years old on average, according to Fidelity’s data as of the third quarter 2017.

On average, savers are setting aside 14.8 percent of pay, while their employers are matching 9 percent, according to Fidelity.

“They tend to save a lot in their 401(k)s,” said Jeanne Thompson, senior vice president of Fidelity Investments, the country’s largest administrator of 401(k) plans.

“The key is to start saving as early as you can,” Thompson said.