Michelle Singletary: The 401(k) millionaire next door
If you have a 401(k) or similar workplace retirement plan, you need to be up in arms.
As part of the
Workers can now contribute up to
If you're over 50, a catch-up provision allows you to contribute up to
With the ability to save so much money in a 401(k) every year, you can let compounding interest do its wonderful thing.
We know
The proof of the success of the 401(k) or TSP has been the ability of an increasing number of participants to reach a high milestone.
The TSP had 16,475 millionaires as of August of this year. There were 2,675 millionaires in the same month in 2014. TSP millionaires are a small group relative to the 5.1 million participants, but it's clearly growing.
As of year-end 2014,
In a recent column, I asked these millionaires to share their stories. This is what they told me: They didn't come from money. They became millionaires by patiently putting money into their company plan every paycheck. They took advantage of company matches. When they got raises, they increased their contributions. They didn't cash out of their retirement account when they moved to another job. They didn't panic when the stock market experienced major dips.
Meanwhile, they held on to their cars for years. Their mortgages didn't eat up a super-large percentage of their net income. They shunned debt. They lived well but still below their means.
And although a good percentage of those who reached out to me earned in the
Linda has close to
"I always withheld the maximum and got the maximum match from my employer," wrote one 401(k) millionaire from
M.L, who is a 55-year-old TSP millionaire, started early and was an aggressive investor, putting her contributions in the
"Since I was young and figured I had 30-plus years to go, I put all my contributions in the C fund," she wrote to me. "Every January when we received a COLA (cost of living increase), I increased my percentage by 1 percent."
One couple who both work for the federal government have combined savings of close to
D.P. from
Does the tax code need an overhaul? Of course it does. But
The people who have become millionaires serve as an inspiration of what can happen when you use this retirement vehicle the way it was intended.
It makes no sense to criticize people for not saving enough for retirement and then propose a plan that could greatly reduce the very incentive that has encouraged them to take care of themselves.
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