Can you become a millionaire just by saving for retirement through a 401(k)? The answer is a clear yes. Fidelity Investments, which handles 24 million 401(k) accounts, revealed in its latest quarterly report that there are almost a half a million (497,000) 401(k)-created millionaires in their system (tinyurl.com/38rnert7).

According to Fidelity, the 401(k) millionaires "were able to reach this level of retirement savings by starting early and contributing consistently over many years." That's clearly a formula for success.

Overall, average account balances for 401(k)s with Fidelity were at $127,100 during the second quarter, with total average 401(k) savings rates being 14.2% (employees contributing 9.4%, and employers contributing 4.8%). Even younger participants (Gen Z's born between 1997 and 2012) have been saving, with average balances of $12,000, a solid start for this demographic slice that includes brand-new workers (tinyurl.com/4xxh4x87).

So here's a question for you: From your current position today, can you see a pathway to contributing more to your 401(k)? Or to start contributing if you don't already?

Before saying "no," do one thing for me:

If you are currently participating, find out if you are maximizing the employer match (if there is one). Also find out about the vesting schedule (some matches take a few years to vest, meaning if you leave the company before vesting, you can't take the full match with you).

If you are not participating, but your available plan does offer a match, my advice is to ask for help. You are losing money that your employer wants to give you for your retirement.

For example, a common employer match caps out at 6% of your compensation. That means if you make $60,000, the most your employer will match is up to $3,600 (6% of $60,000).

If the match is dollar-for-dollar, you would receive $3,600 as a contribution from your employer. To qualify for the full $3,600, you have to do your share by participating in the plan and contributing $3,600 as a payroll deduction.

If you look at the dollar-for-dollar match, as I do, from an investment point of view, you'll see a return of 100% on your investment. It helps to think of a match as immediate compounding. Try to get those results in a savings account.

Or, if the match is 50 cents on the dollar, which is more common, the maximum employer match on the $60,000 example would be $1,800 (one-half of $3,600). You contribute $3,600 through your payroll deduction, and your employer puts $1,800 in your 401(k) account as a match. This match gives you a 50% return on your investment -- without the wait that the math of compounding requires.

Do me a favor, check out your 401(k) plan's match. And, write to me with questions (readers@juliejason.com).

Another point. When you contribute to your 401(k) as we have discussed, your W-2 will not include the contributions nor the matches as taxable income, and you will lower your overall W-2 earnings, which means there is a potential for lower income taxes overall.

If you get a refund at tax time, you need to check your withholding allowances. Consider eliminating that refund so you can afford to put more into your 401(k). You may be able to maintain the size of your take-home paycheck by adjusting your withholding allowances. You will want to talk with your tax adviser to work out the details.

One final point: It's September, which means that 401(k) education is on my mind. As regular readers know, I'm an advocate of financial literacy education. That's why six years ago, I created and fund the 401(k) Champion Competition. Full disclosure: I am NOT in the 401(k) business.

The 2024 competition launched on Sept. 9, following National 401(k) Day, and I encourage all 401(k) participants to apply now to tell their stories about their 401(k) experiences. There is no cost. Three winners each earn the title of 401(k) Champion and a check for $1,000. The deadline for applying is Oct. 10, but please don't delay. Go to 401kchampion.com for more details.

There's something special about September, agreed?

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If you are one of the many people who are averse to reading prospectuses, let me explain something: Prospectuses are like martial arts. They can teach you self-defense.

Having written prospectuses as a young Wall Street lawyer, I can share a few tricks on how to make it through the legalese.

First, don’t confuse a prospectus with literature. Forget about reading one from start to finish as you would an article or a story. Read it as you would a warning label on a bottle of prescription medicine, remembering that the prospectus is there to protect you. Read it for signs of danger -- that is, anything that you can misunderstand to your detriment.

What’s an example? If you are attracted to the product because of guarantees presented to you orally, you’ll want to confirm your understanding with language in the prospectus. You can ask your adviser to point out the relevant language.

Other examples: What about penalties for early withdrawal (contingent deferred sales charges)? Or something that can work to your advantage, such as a waiver of sales commissions for IRA accounts?

Second, remember that a commissioned adviser’s job is to sell. Your job is to be a skeptic. Read the prospectus to find reasons you may NOT want to buy the investment. Example: Costs are too high.

Third, scan a few prospectuses. You’ll see that they follow a formula. One section will explain the investment; another will discuss risks; others will set out how to buy, how to sell, charges and fees, taxes and so on. Some products come with prospectuses in multiple parts. Be sure to get them all if you are investing serious money.

Fourth, when in doubt, compare and contrast. For example, if you are presented with a variable annuity with guarantees that are hard to understand without an interpreter, ask a competing salesperson to present you with a product he or she would recommend. Have each person present the pros and cons of each product, but don’t stop there. Compare and contrast each prospectus as well, section by section.

Fifth, don’t buy something before getting answers to the following key questions:

1. What does the investment promise to deliver?

2. Under what conditions will the promise not be delivered?

3. If there are guarantees, against what, by whom and under what circumstances? Guarantees of any sort need to be studied closely, since they can be misunderstood. Unconditional guarantees don’t exist.

4. What are the risks associated with the investment in normal markets as well as in the worst-case scenario?

5. What is the most you can lose, and under what circumstances?

6. How can you get your money back?

7. Are there any penalties?

8. What are the tax consequences?

9. What are the costs of buying the investment, compared with the cost of owning the investment, and the cost of your selling the investment?

10. What does the salesperson make if you buy the product?

With the information you find in the prospectus, you can ask more direct questions and, ultimately, make a more reasoned investment decision.

As a rule, you don’t want to buy something until after you have read about and understood the benefits and the risks of the investment, especially if there is pressure to take advantage of a special feature, such as a bonus that is “only available until 3 p.m. today.”

If you are uncomfortable for any reason, pass up the opportunity. Others will come along.

If you would like more information on this topic, the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy has created a three-part series on reading a mutual fund prospectus (tinyurl.com/3c9btrhz).

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Members of Generation Z (ages 12 to 27) are continuing to move into the workforce, and they are beginning to save for retirement. If you were born between 1997 and 2012, let's talk.

I'm all for starting to save for retirement as soon as you start to earn wages, for a very simple reason: The longer you have before retirement to save and invest, the more retirement security you can create for yourself. That's the magic of compounding. (Read more about compounding at the Consumer Financial Protection Bureau -- tinyurl.com/ymyv8bkn.)

Even a 12-year-old can earn money by doing odd jobs, such as mowing lawns or babysitting, and put some or all of those earnings into a Roth IRA of his or her own. (A parent will need to be the custodian or guardian. See an example of how it works at Fidelity Investments -- tinyurl.com/ms2eytnh.)

If you need some motivation to get started, consider this: You are a generation in which the full retirement age for Social Security retirement benefits is currently 67, yet the latest report from the Social Security and Medicare Board of Trustees indicates that the federal retirement program will only be able to pay 100% of total scheduled benefits until 2035 -- when the oldest of you will be 38 (tinyurl.com/npxc2yse).

You may tell me that you don't want to think that far ahead. That's how more than half of you feel, based on a recently released Transamerica Center for Retirement Studies' 24th Annual Retirement Survey of Workers that surveyed Gen Z's who were 18 years old or older and were working part or full time (tinyurl.com/yb2epyrz). Fifty-three percent either strongly or somewhat agreed with this statement: "I prefer not to think about or concern myself with retirement investing until I get closer to my retirement date." From my perspective, that's a clear giveaway of not understanding that time is the essential element that drives compounding.

Some Gen Z members surveyed are planning on living to age 100 or older (18%), and 15% plan to live into their 90s. These can be realistic assessments, since we are living longer (the life expectancy at age 65 for the U.S. population rose to 83.9 years old in 2022, according to the National Center for Health Statistics -- tinyurl.com/4f3z93sk). That means that Gen Z's will need enough retirement savings to support themselves for four decades after they stop working.

The time to start planning is now. Guessing how much of an effort is needed is not a good idea, yet 47% of Gen Z's surveyed did just that. They guessed about savings goals -- again, not a good idea.

This is where the need for financial literacy education at earlier ages becomes apparent. The Next Gen Personal Finance website (ngpf.org) provides financial education resources for teachers, with the organization's goal being that by 2030, every high school student will graduate having taken a one-semester course on personal finance.

To further your own knowledge outside of school, look for credible resources. Investor.gov is a website of the U.S. Securities and Exchange Commission. The site's Introduction to Investing section (tinyurl.com/3fkbnker) features details on various investment products and retirement plans, as well as the Roadmap to Saving and Investing.

FINRA, which regulates the U.S. bond market, provides sections on personal finance (tinyurl.com/bdtmbhry), investing (tinyurl.com/muyuj33k) and protecting your money from fraud (tinyurl.com/bdf9jd3t).

The Consumer Financial Protection Bureau offers helpful information on how to create and maintain an emergency savings fund at tinyurl.com/56v9nnzd.

As a member of Gen Z, you have the benefit of a long, long time to build up your efforts to save for a full and meaningful retirement. I encourage you to get on track if you are not fully engaged. Your financial future is closer than you think.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION