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 certainly not alone. In fact, a vast majority of American adults (74%) do not believe they will ever become high net worth, defined as having at least $1 million in investable or liquid assets, according to a recent study. Morning Consult survey commissioned by digital wealth management company Personal Capital.

But becoming a high net worth person throughout your life involves more than earning a good salary or having multiple sources of income.

Retirement investing, something we all have access to, actually plays a big role in many millionaires’ portfolios: For high-net-worth individuals who use the Personal Capital panel, retirement accounts like 401 plans (k) and IRA accounts contributed 55%. of your total assets.

“That’s something I think high net worth investors have figured out,” Michelle Brownstein, a certified financial planner and vice president of Personal Capital Private Client Group who works with high net worth clients, tells Select. “The strategies required to get rich are different from those required to stay rich and eventually win with your money.”

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Prioritize maximizing your retirement accounts

While the majority of the same 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, from really growing your net worth in the long run. With a 401(k) retirement account, for example, your earnings automatically roll back into your plan and compound interest kicks in, allowing you to earn returns on your initial investment in addition to your investment earnings.

Retirement savers with 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 age 50 or more can make an annual catch-up contribution of up to $6,500 in 2022, for a total contribution of $27,000.

Don’t forget that your 401(k) contributions grow 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 meet any employer contributions, otherwise that’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 a total of $6,000 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 don’t take a backseat. In general, traditional IRAs are more effective if you expect to be in a lower tax bracket when you retire, while Roth IRAs are better for those in a lower tax bracket today. You can find both traditional and Roth IRAs at reputable brokers like Charles Schwab and Fidelity, or through automated advisors like Betterment.

As you work to build your retirement savings, be sure to track your personal net worth progress over time through tools like Personal Capital and Mint, which allow you to link all your accounts in one place, including your checking, savings, money markets, Certificates of Deposit, and retirement accounts, as well as your debt accounts.

Loyalty investments

  • Minimum deposit and balance

    Minimum deposit and 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. $25,000 minimum balance for personalized advice and planning from Fidelity

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  • Cousin

  • investment vehicles

    Robo-advisor: FidelityGo® and Fidelity® Planning and personalized advice GONNA: Traditional, Roth and Rollover IRAs from Fidelity Investments Brokerage and trading: Fidelity investment trading Other: Fidelity Investments 529 College Savings; Loyalty HSA®

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Improvement

On Betterment’s secure site

  • Minimum deposit and balance

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

  • Rate

    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%

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  • investment vehicles

  • investment options

    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment RetireGuide™ helps users plan for retirement

Personal Capital

On the secure site of Personal Capital

  • 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)

  • Featured Features

    A budgeting app and investment tool that tracks both your spending and your wealth.

  • Categorize your expenses

    Yes, but users can modify

  • Links to accounts

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

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    Offered on both the App Store (for iOS) and Google Play (for Android)

  • security features

    Data encryption, fraud protection and strong user authentication

mint

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

  • Cost

  • Featured Features

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

  • Categorize your expenses

    Yes, but users can modify

  • Links to accounts

    Yes, bank and credit cards.

  • Availability

    Offered on both the App Store (for iOS) and Google Play (for Android)

  • security features

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

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

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