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Color of Money: The 401(k) millionaire next door

Michelle Singletary on

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 $100,000 range, some didn't.

Linda has close to $1.5 million and makes less than $60,000 a year. She's been at her job for 42 years and has a very generous employer match. "I began with 5 percent, and as I was there longer, every year I got a raise, and I would take 1 percent of the raise and put it in retirement. Since the rest of the increase went into my pocket, I never missed it."

"I always withheld the maximum and got the maximum match from my employer," wrote one 401(k) millionaire from Maryland. "I invested in index and mutual funds. I continued to invest through all the ups and downs of the market, and I have been astounded at how much I have saved."

M.L, who is a 55-year-old TSP millionaire, started early and was an aggressive investor, putting her contributions in the Common Stock Index Investment Fund or C Fund.

"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 $2 million. "In the beginning of our careers, we didn't contribute as much as we could have, but we soon started to devote raises to max out our contributions."

D.P. from Texas hit the millionaire mark a month ago. She's 57 and has been at her job for 35 years. Every few years, she also would increase the percentage she contributed. "I have been at 11 percent for quite a few years now, with a company match of 9 percent. I live a frugal, modest lifestyle, and my retirement accounts prove that compounded interest can work for anyone."

Does the tax code need an overhaul? Of course it does. But Congress shouldn't look to balance tax cuts to businesses by raiding 401(k)s and similar employer-sponsored retirement plans.

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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Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

(c) 2017, Washington Post Writers Group


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