How to Become a Moderate Millionaire: A Treasure of Common Sense

The 401(k) millionaire club is growing.

Steady savings by many Americans and a third straight year of big gains for U.S. stocks have pushed account balances higher. As 2025 draws to a close, many individual investors are finding holiday cheer in statements showing they’ve surpassed the $1 million mark.

As of the third quarter, there were 654,000 401(k) millionaires at the brokerage Fidelity, the highest level in records going back to the early 2000s. About 3.2% of the more than three million accounts tracked by benefits provider Alight had a balance of more than $1 million as of the third quarter, double the figure at the end of 2022. At T. Rowe Price, about 2.6% had of participants have a balance of more than $1 million, up from 1.3% at the end of 2022.

That’s a relatively small amount relative to the total, but still impressive considering that most people change jobs, have different investment accounts, don’t stay in the same 401k plan forever, etc.

It also makes sense in a prolonged bull market.

Of course, like many wealthy millionaires, you can’t really spend your 401k unless you’re retired or willing to pay the taxes and penalties. Most of this new wealth cohort are called “moderate millionaires,” with assets ranging from $1 million to $5 million.

UBS estimates that the number of moderate millionaires has quadrupled since 2000 to 52 million this year. By 2024, a thousand moderate millionaires will be created every day in the US:

I think we should celebrate this rising number of everyday millionaires. This is a positive development.

But there is a difference between rich and RICH:

“Popular culture still thinks of millionaires in terms of Scrooge McDuck or the top-hatted icon of Monopoly,” Paul Donovan, chief economist at UBS’s wealth management practice, wrote in a letter to clients this year. “The new dollar millionaires have crossed a psychological wealth threshold, but their incomes and expenses are those of middle-class households.”

Spending like a “stereotypical millionaire” would likely require at least $5 million, he said.

Reasonable.

But here’s the thing – you don’t become a millionaire by spending money like a millionaire!

You become a millionaire by saving and investing, not by spending! Wealth is a lack of spending.

This is not a new concept.

The millionaire next door came out in 1996. These are the characteristics of the most moderate millionaires:

Being a millionaire doesn’t mean spending $1 million. It means you save $1 million.

For most people, becoming a millionaire requires sacrifice, hard work and patience.

Sure, there are people who win the metaphorical lottery through speculation, family money, or luck. They have an obscene amount of wealth and spend obscene amounts of it.

But most people build their wealth over many years by saving, investing and adding to capital.

And one of the reasons people can build their capital through patience is because deferred retirement plans make it difficult for you to access the money. It’s a feature, not a bug.

Spending your money should be part of any healthy financial plan.

But most people won’t become a single millionaire if they don’t save first.

Michael and I talked about 401,000 millionaires, moderate millionaires, money versus meaning and more in this week’s Animal Spirits video:



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Further reading:
Make the most of your 401k

Here’s what I’ve been reading lately:

Books:

¹UBS also shows that 60 million households (1.6% of the world’s population) own almost 50% of the world’s wealth. The top 18% own 87% of the wealth.