401(k) Millionaire Status Grows Among Women in the Workplace Self-Directing Your Retirement Plan Can Get You There, Too

Published on January 16, 2018

Although many people dream of accumulating at least $1 million in retirement savings, that amount of wealth is not often attained due in part to Americans’ overall savings deficit. However, a growing number of working women have indeed saved at least $1 million in their retirement plans since 2005, according to research conducted by Fidelity.

Based on the 15 million participants in 401(k) accounts with Fidelity, approximately 20 percent of individuals with accounts worth $1 million or more were women as of September 2017; this is double the amount from 12 years ago. Fidelity Investments attributes this rise to more women participating in and contributing more to workplace 401(k) plans. Nice work, ladies!

With women still facing a gender pay gap and a savings gap, the road to millionaire status remains a challenge for some. Women also live longer than men, so the need to have sufficient assets to take them through their retirement years is significant. The good news is that more women are taking control of their finances, are becoming co- or primary breadwinners, and are becoming savvier about their financial futures.

Although not all of these retirement plan millionaires are earning mega-high salaries, they are clearly making smart decisions to save for retirement. Here’s what we do know about them:

• Among those earning less than $150,000, women earn an average of $117,000, just slightly under $118,800 for men.
• The women who earn less than $150,000 but still became 401(k) millionaires save an average of 18.1 percent of their salaries, which is complemented by employer contributions of 6.8 percent. This is a slightly higher savings amount than men (24.9 percent total vs. 22.8 percent total including employer match).
• Higher incomes will of course make it easier to attain these savings levels. Overall, these 401(k) millionaire women earn an average annual salary of $287,700 (still behind men’s annual salaries at $354,600).
• Both men and women also tend to surpass that $1 million mark after age 50, though women do so slightly earlier at age 58.5 (versus 59.3 for men).
• Both genders have earned similar rates of return on their money and have been working and saving for about thirty years.

While it is not known how many of these women are parents with child care expenses or have faced financial pressures due to the housing market or life changes (divorce, for example), they have been gainfully employed over the long term and appear to have weathered financial storms over time. It’s clear that saving over the long term with discipline yields retirement riches to a certain extent.

Imagine what they could build in retirement savings if they were self-directing their plans!

Most large, brokerage firms limit the investments allowed in your retirement plans to stocks, bonds and mutual funds. A healthy stock market will help those plans grow in value, but having the option to self-direct a retirement plan can turbo-charge those retirement savings through alternative investments not allowed in typical plans.

Does your employer’s workplace retirement plan allow you to self-direct your plan? If you know and understand certain nontraditional investments—such as real estate, commodities, precious metals, or private equity investments—you could be including those investments in your retirement wealth-building strategy. This is a healthy way to diversify your portfolio and enjoy the same tax advantages as regular retirement plans.

Including a broad array of alternative assets arms you with the potential to build a more eclectic retirement portfolio, which could help get you to that $1 million mark—and you can get started at any age.

At Next Generation Trust Company, we custody and administer self-directed retirement plans. Our sister firm, Next Generation Services offers administration and transaction support. You can read more about self-direction as a retirement wealth-building strategy by visiting our website and YouTube channel for informative videos that will help get you started.

Have questions or want to speak to a live representative? Call us at 1-888-857-8058 or email us at info@nextgenerationtrust.com.