Thanks to the recent stock market rally, checking your 401(k) balance is no longer a cause for fear and trepidation. Fidelity Investments reported that the average 401(k) account balance in plans it manages rose nearly 8.3% in the second quarter of 2023 from a year earlier. Meanwhile, the number of 401(k) participants with $1 million or more in their accounts rose nearly 29% from a year earlier.
Whether you have $1 million or $100,000 in your account, there’s no question that contributing to a 401(k) or similar employer-provided plan is one of the most effective ways to ensure you’ll enjoy a comfortable retirement. But there’s a downside to traditional 401(k) plans, especially if you fall into the millionaire category: All of that money will be taxed when you take it out — possibly at a higher tax rate than you’re paying now.
