Fidelity’s Record 401(k) Millionaires: Why You Should Be Concerned
Did you hear the latest update from Fidelity?
They just announced a record-breaking number of 401(k) millionaires. At first glance, that sounds like fantastic news more people than ever before are hitting the million-dollar mark in their retirement accounts. But as someone who’s been watching this market and helping clients create real passive income for years, I’m here to tell you… this might not be the good news it seems.
According to Fidelity, nearly 600,000 people now have over $1 million in their 401(k)s, with another half-million IRA millionaires rounding the total to about 1.1 million. That’s out of roughly 45 million accounts. If you’re doing the math, that’s barely 2% of savers who’ve reached millionaire status. Even if you only count the half of Americans who actively contribute to their retirement plans, that’s closer to 1% who’ve crossed that threshold.
Now, here’s the kicker: the number one reason for this surge in millionaire accounts wasn’t better saving habits or smarter investing it was stock market highs. That’s right. These portfolios grew because the market did. When the market rises, balances inflate. But what happens when the market drops?
Let’s remember, we’ve had an unprecedented 16-year bull market one of the longest in history. Aside from a brief dip in 2022, it’s been smooth sailing upward. That’s great… until it’s not. Many younger investors have never seen their portfolios lose significant value, and that lack of experience can create a dangerous sense of confidence.
Here’s another reality check: the average 401(k) millionaire is 59 years old and has been saving diligently for 25 years. Most are high earners contributing around 17% of their income plus employer matches that bring the total to about 26%. Even then, after decades of saving, that $1 million translates to only $30,000 a year in retirement income if you follow the 3% rule.
Let’s be honest $30,000 a year isn’t enough for most people to live comfortably, especially with inflation and rising costs. To generate even $100,000 a year in retirement, you’d need over $3 million saved and most people aren’t even close.
So what happens when the market turns? If your portfolio drops by 50%, that million-dollar account suddenly becomes $500,000. And unfortunately, most people don’t adjust until after they’ve lost money. Fidelity’s own data shows that only 5% of investors have made any changes to their allocations, even though over half say they’re “very concerned” about the economy.
That tells me one thing most people are being reactive, not proactive.
This is exactly why I preach cash flow and passive income over traditional retirement strategies. Because if your financial freedom depends on the mood of the market, you don’t actually have control. You’re gambling on hope, not building wealth.
So I’ll ask you are you part of the 90% waiting for the market to decide your future, or the 10% taking action to create financial independence today?