With your employee 401k retirement plan, becoming a millionaire is incredibly obtainable by hardly doing a thing. You simply enroll, spend a little time over the funds your company offers to invest in, indicate how much of your pay you want to contribute, and sit back and watch your retirement account grow. Every now and again you take a look to see if you need to re-balance or adjust your account, and that’s it. It’s all automatic and you likely won’t even notice the money missing from your paycheck.

While a retirement account and 401k sounds boring, there are plenty of reasons to get excited:

• This simple activity can make you a multi-millionaire by the time you retire. A 25-year-old making $40,000 a year who invests 10% of their salary into a 401k plan would have $1.9 million by the time they retire (assuming 10% average annual return on investment). Now, let’s look at the same example and assume a 5% raise is received every year. That 401k plan is now worth $3.2 million. Do you think you could live comfortably off of $300,000 during retirement? That’s what you could expect to earn just off the returns on that nest egg. Note that this does not even take into consideration employee matching benefits that would also boost your 401k. This is free money you are leaving on the table if you are not taking advantage of your company’s matching program.
• Time, of course, is the investor’s best friend when it comes to making your money grow in a retirement account. Obviously the sooner you start contributing toward your 401k, the more money there will be at retirement. Compound interest is so powerful though, that the time variable probably pays a bigger role than you think. For example, the person above who’s making $40,000 and starts contributing at 35 will only have $1.1 million – a difference in nearly a million dollars.
• With your 401k it is easy for you to invest like a millionaire and put your money directly in an investment account before you are taxed on your income. Self-made millionaires are experts at minimizing their income for tax purposes. Since your 401k acts as a tax shelter and contributions are made before taxes, you pay less taxes on your take-home pay, invest with tax-free money, and assist in remaining in a lower income tax bracket altogether.

These are just some of the major benefits of taking advantage of your employer’s 401k plan. Get started now if you haven’t already, or consider contributing more. At the very least, try to take full advantage of your company’s matching program so you are not passing up free money.