There are more 401(k) millionaires in the U.S. than ever before. Fidelity Investments performs a quarterly analysis of retirement savings. Its most recent report revealed a record-high 497,000 individuals have 401(k) balances of at least $1 million.

Do you want to join the club? Here are five tips all Americans should know to become a 401(k) millionaire.

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1. Start saving early

The Rolling Stones gave some excellent investing advice with their song, “Time Is On My Side.” The more time you allow a 401(k) account to grow, the better your chances will be to become a millionaire. It makes sense, therefore, to start saving as early as possible.

Let’s assume you began contributing $2,400 annually to a 401(k) plan at age 25. With a 10% average annual return (which is roughly the historical average for the S&P 500), you’d have more than $1 million by the time you reached 65.

2. Take advantage of employer matches

The old saying that “there’s no such thing as a free lunch” isn’t true — at least not for most 401(k) plans. Roughly 98% of employers offer a 401(k) match, according to one estimate.

Company 401(k) matches are essentially free money. When an employee contributes up to a specified amount, the employer will match their contribution either fully or in part. If you want to become a 401(k) millionaire, you’ll definitely want to take full advantage of employer matches.

3. Contribute as much as possible

The ancient Roman poet Cicero wrote, “Ut sementem feceris, ita metes (As you sow, so shall you reap).” His sentiment was echoed by the Apostle Paul in his letters to the churches in Corinth and Galatia.

Cicero and Paul obviously weren’t thinking of 401(k) accounts, but their shared principle applies to retirement savings. The more you sock away into your 401(k) plan, the more money you’ll have later on. It’s wise to contribute as much as possible. For 2024, employees can contribute up to $23,000 to their 401(k) account. If you’re 50 or over, you can make an additional “catch-up” contribution of $7,500.

4. Build a diversified portfolio

In 1605, Spanish author Miguel Cervantes warned against putting all your eggs in one basket in his famous novel, Don Quixote. That’s still good advice today for anyone hoping to become a 401(k) millionaire. Build a diversified portfolio in your retirement account.

A diversified portfolio reduces your risk by spreading your money across a large number of investments. There are different kinds of diversification, though, including:

• Asset diversification: Spreading investments across types of assets, such as stocks, bonds, real estate, etc.
• Geographical diversification: Spreading investments across different geographical regions
• Sector diversification: Spreading investments across different sectors such as consumer goods, financials, healthcare, etc.

Keep in mind, though, that stocks have historically provided the highest long-term returns of any asset class. You could improve your chances of becoming a 401(k) millionaire by investing primarily in stocks or stock funds, especially when you are years away from retirement.

5. Don’t withdraw money from your 401(k) early

Withdrawing money early from your 401(k) is a bad idea for two reasons. First, if you take out money before you reach age 59 1/2 except for approved special circumstances, you’ll have to pay a 10% penalty. Second, your money won’t be able to grow if it isn’t invested.

What about borrowing from your 401(k)? There are pros and cons to 401(k) loans. If you do borrow from your 401(k) account, the most important thing is to pay back the loan on time.

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