Retirement accounts make up more than half of HNWI wealth

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If you think having a high net worth is a far-fetched dream, you’re definitely not alone. In fact, a large majority of American adults (74%) don’t believe they themselves will become a high net worth individual – defined as having at least $1 million in investable or liquid assets – according to a recent Morning Consult survey. commissioned by digital wealth management company Personal Capital.

But becoming a wealthy person in your lifetime involves more than earning a good salary or having multiple sources of income.

Retirement investing – something we all have access to – actually plays a major role in the portfolios of many millionaires: for wealthy individuals who use the Personal Capital dashboard, retirement accounts such as 401(k) plans ( k) and IRAs contributed 55%. of their overall wealth.

“It’s something that I think high net worth investors have figured out,” Michelle Brownstein, a certified financial planner and vice president of Personal Capital Private Client Group working with high net worth clients, told Select. “The strategies needed to get rich are different from those needed to stay rich and eventually make money.”

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Prioritize maximizing your retirement accounts

While most of the same survey respondents (59%) agreed that maintaining a diversified investment portfolio is important, fewer (46%) prioritized maximizing their retirement accounts.

This belief, however, can prevent you from making your money work for you and ultimately actually increasing your long-term net worth. With a 401(k) retirement account, for example, your earnings automatically flow back into your plan and compound interest works, allowing you to earn returns on your initial investment, plus your investment earnings.

Retirement savers with a 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan can contribute up to $20,500 in 2022, while 401(k) savers aged 50 and over can make an annual catch-up contribution of up to $6,500 in 2022, for a total contribution of $27,000.

Remember that your 401(k) contributions increase tax-deferred and also reduce your taxable income. If you can’t afford to max out your 401(k), at least make sure you’re contributing enough to respond to any correspondence from the employer, otherwise it’s essentially free money left on the table. As your income increases, you can also increase the amount of your contribution.

Those with a traditional IRA or Roth IRA can contribute up to $6,000 in total between their accounts, while IRA savers age 50 and older can make an annual catch-up contribution of up to $1,000, for a total contribution of $7,000.

If your employer doesn’t offer a 401(k), consider opening an IRA so retirement savings aren’t put on the back burner. Generally, traditional IRAs are most effective if you expect to be in a lower tax bracket when you retire, while Roth IRAs are best for those in a lower tax bracket today. today. You can find traditional and Roth IRAs at big-name brokerages like Charles Schwab and Fidelity, or through robo-advisors like Betterment.

As you work to grow your retirement savings, be sure to track how your personal net worth is changing over time with tools like Personal Capital and Mint, which let you link all your accounts into one. location, including checking, savings, money markets, CDs and retirement accounts, as well as your debt accounts.

Loyalty investments

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go account, but a minimum balance of $10 for the robo-advisor to start investing. Minimum balance of $25,000 for personalized planning and advice from Fidelity

  • Costs

    Fees may vary depending on the investment vehicle selected. No commission fees for trades in stocks, ETFs, options and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go is free for balances under $10,000 (afterwards, $3 per month for balances between $10,000 and $49,999; 0.35% for balances over $50,000). Fidelity’s personalized planning and advice has a 0.50% advisory fee.

  • Prime

  • Investment vehicles

    Robo-advisor: Fidelity Go® and Fidelity® Personalized planning and advice IRA: Fidelity Investments Traditional IRAs, Roths and Rollovers Brokerage and negotiation: Fidelity investment trading Other: Fidelity Investments 529 Education savings; Loyalty HSA®

  • Investment opportunities

    Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares

  • Educational resources

    Comprehensive tools and industry-leading in-depth research from over 20 independent vendors

Improvement

On Betterment’s secure site

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. For Betterment Digital Investing, minimum balance of 0 USD; Premium investment requires a minimum balance of $100,000

  • Costs

    Fees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has an annual fee of 0.40%

  • Prime

    Up to one year of free management service with qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC

  • Investment vehicles

  • Investment opportunities

    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment RetireGuide™ helps users plan for retirement

Personal capital

On the Personal Capital secure site

  • Cost

    The app is free, but users have the option to add investment management services for 0.89% of their money (for accounts under $1 million)

  • Standout Features

    A budgeting app and investing tool that tracks both your spending and your wealth

  • Categorize your expenses

    Yes, but users can modify

  • Links to accounts

    Yes, bank cards and credit cards, as well as IRAs, 401(k)s, mortgages and loans

  • Availablity

    Available in the App Store (for iOS) and Google Play (for Android)

  • Security functions

    Data encryption, fraud protection and strong user authentication

mint

Information about Mint was independently collected by Select and was not reviewed or provided by Mint prior to publication.

  • Cost

  • Standout Features

    Shows income, expenses, savings goals, credit score, investments, net worth

  • Categorize your expenses

    Yes, but users can modify

  • Links to accounts

    Yes, bank cards and credit cards

  • Availablity

    Available in the App Store (for iOS) and Google Play (for Android)

  • Security functions

    Verisign scanning, multi-factor authentication and Touch ID mobile access

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

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