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American millionaires have a lot in common — from the way they built wealth to their education levels. But they also share a common account type in their portfolios.
The author and personal-finance expert Dave Ramsey’s Ramsey Solutions conducted a survey of over 10,000 American millionaires and found that most (79%) didn’t receive an inheritance, 69% never averaged a six-figure salary from their careers, and 88% went to college.
And they have one other common trait: Most had a 401(k), a type of retirement savings account commonly available through employers.
8 out of 10 millionaires have a 401(k) — and they’re an easy way to save
Of the millionaires surveyed, 80% opened a 401(k). These accounts offer tax advantages by saving pretax money and help savings grow faster with the possibility of free money through an employer match.
Setting up a 401(k) is relatively easy. You’ll just need to choose the percentage of your salary you want to contribute and set it up through your employer’s HR department. Once it’s set, it’s mostly automatic, as the money comes out of your paycheck each month before you even receive it. Alternative options are available for anyone who is self-employed or doesn’t have a workplace 401(k) available.
And these retirement accounts are relatively low effort — they work best when they’re left alone to grow for years.
401(k)s build wealth over time, the same way most millionaires do
The survey data also revealed that millionaires generally build wealth the same way most 401(k) accounts grow — slowly over long stretches of time. The data shows that three-quarters of millionaires said their success was a result of consistently saving over a number of years.
According to the data, the average millionaire spends 28 years working, investing, and saving before reaching $1 million. And retirement accounts work very similarly.
These accounts build wealth over time, through contributions, matching, and compound interest. Compound interest adds interest on top of interest, acting like a snowball, building in size with time.
For most millionaires in the US, it’s not about getting large amounts of cash quickly. Instead, it’s about growing small amounts over long periods of time. And for anyone else with the same goal, a 401(k) is a smart place to start.
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