How the big money gets saved
The IRS says it doesn't keep data on the highest 401k balances, and providers of the plans refuse to disclose the figures. Anecdotally, however, advisers say it's not uncommon for savers to rack up balances in the $3 million to $5 million range.
Bedda D'Angelo, the president of Fiduciary Solutions in Durham, N.C., says one of her clients amassed $6 million in her 401k. An executive at a pharmaceutical company, the client maxed out her pretax contributions each year, and, including after-tax contributions, saved close to 30% of her earnings annually.
She was the kind of person who never had debt -- not even mortgage debt, D'Angelo says. "She was a disciplined saver, whenever she got a bonus -- she would invest half of it." Her plan had a mix of large cap, small cap, international equities and a bit of bonds, and at 56, when she retired, she was earning $450,000.
Another client who saved more than $1 million worked his entire career at General Electric (GE, news) and invested only up to the company match, but entirely in company stock, D'Angelo said. Though such a strategy seemed dangerous -- even before the collapse of Enron, when many employees suddenly found themselves holding worthless shares -- the employee refused to diversify, she says.
"As soon as I met him, I tried to convince him not to, but he wouldn't hear it," she says.
Other advisers also shared tales of employees making millions with only company stock in their plans. "Those who bet the entire house on a particular stock are always going to have a higher probability of a big win, but they also may end up in big trouble," VanDerhei says.
Kathleen Campbell, the founder of Campbell Financial Partners in Fort Myers, Fla., says the handful of her clients who have saved from $1 million to $2 million in their plans all maxed out their contributions. In addition, they refrained from jumping in and out of investment selections based on the whims of the market. But she also had clients get rich on company stock, a strategy she discourages. "Best not to be holding the bag with your retirement savings in another Enron or Bear Stearns," she says.
