The best return you'll ever find

August 1, 2023

“401(k)s are a scam.”

“Wealthy people don’t invest in their 401(k).”

If you spend any time on money TikTok, you may have heard people say these things.

But the facts disagree:

80% of millionaires invest in their 401(k).

And Fidelity reported 294,000 401(k) millionaires in 2022. This means 294,000 people crossed the $1,000,000 threshold within their 401(k).

Ignore the TikTok videos (most of them are trying to sell you a product).

This is what you need to know about your 401(k). 👇

What is a 401(k)?

Two things to know:

1) They are US-based accounts.

2) 401(k)s are employer-sponsored plans. All this means is your employer has to offer this account to have access to one.

For my fellow self-employed, there are accounts called Solo 401(k)s you may be able to use, but we'll get into that another time..


Even if your work offers a 401(k), you may not be eligible to contribute to it yet.

Most employers require:

  • 1 year of service, and
  • To be at least 21 years old.

There’s a good chance your employer will keep you updated on your eligibility and may even automatically enroll you in the plan once you are eligible.

But if you’re unsure, do not be afraid to ask.

Your HR person should know everything about your company’s retirement plans.

If you have a goal of financial freedom, make your HR rep at your company your best friend.

Employer Match

Now if you read nothing else in this email, read this:

Your employer match is the best return you will ever find. Anywhere.

If you are not getting your employer match already, stop reading this email and find out how to make sure you do.

Seriously. It’s that important.

A quick example to show the importance of a match 👇

Let's say your employer offers a 3% match (a very common match) every paycheck.

You get your bi-weekly paycheck of $2,000 and you elect to have 3% or $60 taken from your paycheck to go into your 401(k).

This is the trigger to your employer.

Your employer sees you put in $60, so they uphold their end of the deal and also put in $60.

Your $60 just made $60.

That’s a 100% return. A 100% return every paycheck.

I repeat: you will not find a return like this anywhere else. Run, don’t walk, to your employer match.

Man I miss my employer match..

Traditional or Roth 401(k)?

Traditional 401(k): you contribute pre-tax money, which means:

  • Money goes in tax-free
  • Money grows tax-free
  • Money is taxed when you pull it out in retirement

Roth 401(k): you contribute post-tax money, which means:

  • Money goes in with taxes already taken out
  • Money grows tax-free
  • Money comes out tax-free in retirement for qualified distributions

Most employers are now offering both options, which is great.

We love options in personal finance.

But having this option seems to stress people out more than help them.

What should I do? What if I mess it up?

First off, if you’re saving money, you’re not messing anything up. You’re already doing a great job.

Second, there is no perfect answer here. Just a mostly right answer.

Here’s a framework for how to think about it:

Are you high income?

Yes: a tax-deduction today (traditional 401(k)) may benefit you more than a tax deduction later (Roth 401(k)).

Are you in peak earning years?

Again, a tax deduction today many benefit you more than a tax deduction later.

Do you expect your income to rise?

If you’re in the beginning of your career, you’re probably in your low earnings year. It may be best to pay taxes today (Roth 401(k)).

What if you have no idea?

Your employer will probably allow you to contribute to both.

And tax diversity is never a bad thing.


If you are under 50:

You can put in $20,500 for 2022 into this account.

If you are 50 or over:

You can put in $27,000 for 2022 into this account (you get a “catch up” amount).

Your employer can contribute on top of this.

How long would it take for you to reach millionaire status within this account?

If it was just you contributing and you invested $20,500 into your 401(k) each year and earned a consistent 8% return each year, you’d achieve a balance of $1,000,000 in roughly 21 years. And again, this is not including your employer match.


A 401(k) is an account that holds investments, not an investment itself.

It’s a 3 step process:

  1. Open the account
  2. Send the money to the account
  3. Invest the money in the account

Now, sometimes your employer will automatically invest the money for you.

Usually in something called a “target date fund”.

These funds can be a good option for a hands-off approach.

Target date funds are designed to get more conservative as you get closer to your retirement date.

Meaning they automatically rebalance and do the work for you.

But target date funds can be expensive and overly conservative.

So be sure to look into the other investment options your employer offers you.

The second best thing about a 401(k) (after the employer match) is the automatic component of it:

  • Automatic contributions
  • Automatic investing
  • Automatic matching

The reason this account is so powerful is because it turns you into a disciplined, consistent investor.

So don’t interrupt it.

Don’t try to market time by turning your contributions on and off.

This is a long-term account designed for retirement.