High-net-worth individuals have over half their wealth in IRAs and 401(k)s (2024)

If you think having a high net worth is a far-fetched dream, you're certainly not alone. In fact, a great majority of U.S. adults (74%) don't think they'll ever become a high-net-worth individual themselves — defined as having at least $1 million in investable, or liquid, assets — according to a recent Morning Consult survey commissioned by digital wealth management companyEmpower (formerly Personal Capital).

But becoming a high-net-worth individual over the course of your lifetime involves more than making a good salary or having multiple income streams.

Retirement investing — something we all have access to — actually plays a major role in many millionaires' portfolios: For the high-net-worth individuals who use the Empower dashboard, retirement accounts such as 401(k) plans and IRAs contributed 55% of their overall wealth.

"That's something I think high-net-worth investors have figured out," Michelle Brownstein, a certified financial planner and vice president of Empower Private Client Group working with high-net-worth clients, tells Select. "The strategies needed to get rich are different from the ones required to stay rich and eventually earn on your money."

Subscribe to the Select Newsletter!

Our best selections in your inbox. Shopping recommendations that help upgrade your life, delivered weekly.Sign-up here.

While most of the same survey respondents (59%) agreed it's important to maintain adiversified investment portfolio, fewer (46%) prioritized maxing out their retirement accounts.

This belief, however, can hold you back from making your money work for you and, ultimately, really growing your net worth over the long term. With a 401(k) retirement account, for example, your earnings automatically roll back into your plan andcompound interestgoes to work, allowing you to earn returns on your initial investment, plus your investment gains.

Retirement savers with a 401(k), 403(b), most 457 plans and the federal government'sThrift Savings Plancan contribute up to $20,500 in 2022, while 401(k) savers ages 50 and older can make an annual catch-up contribution of upto $6,500 in 2022, for a total contribution of $27,000.

Don't forget that your 401(k) contributions grow tax-deferred and also lower your taxable income. If you can't afford to max out your 401(k), at least make sure you are contributing enough tomeet any employer match, otherwise that's essentially free money left on the table. As your income increases, you can also up your contribution amount.

Those with a traditional IRA or Roth IRA can contribute up to $6,000 total between their accounts, while IRA saversages 50 and oldercan 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 saving for retirement doesn't get 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. You can find both traditional and Roth IRAs at big-name brokerages such as Charles Schwab and Fidelity, or via robo-advisors such as Betterment.

While you're working on boosting your retirement savings, make sure to track your personal net worth progress over time through tools such asEmpowerandMint, which let you link all your accounts in one place, includingchecking,savings,money markets,CDsand retirement accounts, as well as your debt accounts.

Catch up on Select's in-depth coverage ofpersonal finance,tech and tools,wellnessand more, and follow us onFacebook,InstagramandTwitterto stay up to date.

Read more