Wealthy Americans are ditching the 401(k) plans used by 70M workers — here’s where their money is going instead - United States News Beep

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You’ve probably heard the advice a thousand times from financial professionals: Max out your 401(k). And there’s a good reason for that advice.

On the surface, a 401(k) seems like the perfect account. Money goes into it right from your paycheck, your employer may match contributions and it comes with tax benefits. So it’s no surprise that an estimated 71.5 million American workers (1) now have access to 401(k) plans.

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What may come as a surprise is that a growing number of rich Americans seem to be ditching their 401(k)s, at least partly.

Craig Copeland, director of Wealth Benefits Research at the Employee Benefit Research Institute, first noticed this trend around two years ago (2), telling Bloomberg that it’s only accelerated in the past 12 months. Other retirement experts and financial advisors indicated they’d seen the same phenomenon.

According to Bloomberg, although wealthy Americans often have plenty of money to hit the 401(k) contribution limit, which is $24,500 for those under 50 in 2026 (3) (and higher for older Americans eligible for catch-up contributions), high-earning investors are increasingly putting only enough into these accounts to max out their employer match.

What are they doing with their money instead? They’re diverting the rest of the extra cash to other investments. In many cases, the money is going into Health Savings Accounts, Roth IRAs or even taxable brokerage accounts.

Several factors are driving this shift, but one of the most notable is the tax rate. Traditional 401(k) plans provide up-front tax savings, giving investors the chance to make pre-tax contributions. However, taking required minimum distributions is mandatory in retirement, and those withdrawals are taxable when money comes out.

Many savvy investors are wary of claiming their tax savings now, at a time when tax rates are relatively low, and then being forced to take out money at a later time, when rates could be much higher.

This is particularly the case considering the top marginal tax rate currently sits at 37% (4) — compared to 70% in 1978 (5), when Congress created the framework for 401(k) plans — which means the tax benefits these accounts provide are nowhere near as generous as they used to be.

But tax concerns aren’t the only factor affecting the decision to shift funds from a 401(k) plan to other investments.

Some wealthy investors simply want more flexibility than a 401(k) can offer. Putting money into a taxable brokerage account or even a Roth IRA, which allows tax-free withdrawals of contributions at any time (6), makes it possible to access funds for early retirement or other pressing needs before the age of 59 ½ without incurring penalties.

For others, the goal is to access a broader array of investments than a 401(k) can offer, since many 401(k) plans let you invest in just a few pre-selected funds that may not match every investor’s goals.

These are all valid reasons to diversify out of a 401(k) after earning an employer match — so long as you have a solid plan for where else to put the money so it can grow.

For those investors, there are plenty of great options out there to help you invest in your future. Here are a few of those options.

Keep some of your investments liquid

One reason many wealthy people are moving away from 401(k) plans is that you typically can’t withdraw money until age 59 ½ without paying a penalty — unless you fall within a narrow exception to the standard rule.

In cases where you want to retire early or need liquid capital for any other reason, you risk a 10% early withdrawal penalty.

That’s why you might want to have some money accessible in the event of an emergency or opportunity that’s too good to pass up. Having that cash reserve gives you the ability to withdraw money without incurring a penalty or siphoning it away from your investments.

A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering both competitive interest rates and easy access to your money.

A Wealthfront Cash Account currently offers a base rate APY of 3.55% through program banks. With a new client boost and direct deposit incentive, referred clients can earn up to a 4.55% APY.

That’s 10 times the national deposit savings rate, according to the FDIC’s September report.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, you get access to up to $8M FDIC Insurance eligibility through program banks.

Build a diversified portfolio

Of course, it’s always a good idea to avoid sinking too much into cash reserves, especially since your investments could earn a more generous return in the long run.

With so many investment options out there, it’s easier than ever to build a diversified portfolio that gives you access to many asset classes so that you can try to maximize the performance of your investments even during economic downturns.

For instance, commodities like gold have long been seen as both a hedge against inflation and a recession-resistant investment. That’s because the precious yellow metal can’t be created out of thin air or printed at will by central banks. This inherently limited supply can help it store value in the face of inflation.

Gold is also considered to be a safe haven asset. Because it’s not tied to any one country, currency or economy, investors tend to flock to it when economic or geopolitical conditions become rocky — driving prices higher.

So, if you’re looking for a way to bring gold into your retirement investing strategy, opening a gold IRA with the help of Goldco allows you to invest in gold and other precious metals in physical forms while providing the significant tax advantages of an IRA.

All you need is $10,000 to get started, giving you the chance to benefit from both free shipping and access to a library of retirement resources. The company will even match up to 10% of qualified purchases in free silver.

Curious whether this is the right way to diversify your portfolio? You can download your free gold and silver information guide today to see if it’s a good fit for you.

Consider adding real estate

While gold is a good asset to keep in your portfolio, platforms like Arrived offer the opportunity to add another inflation-hedging investment: real estate.

Backed by the likes of Jeff Bezos, Arrived gives investors exposure to SEC-qualified investments in real estate, including rental homes, vacation rentals and diversified funds — with none of the hassles of becoming a landlord.

Here’s how it works: All you have to do is sign up with Arrived, then you can view a selection of vetted properties and start investing with just $100, potentially helping you unlock the door to a comfortable retirement by earning a passive income stream.

Becoming an investor with Arrived gives you access to more than 596 properties across over 67 markets. Plus, once a property is fully funded, you can take advantage of Arrived’s secondary market after six months if you want to reshuffle your portfolio.

And, for a limited time, investors can get a 1% account match when opening an account and adding $1,000 or more.

Get help from a financial professional

Finally, if you want to develop a comprehensive, tax-efficient strategy for retirement, working with a financial professional could be the way to go.

WiserAdvisor can connect you with fully vetted professionals who specialize in precisely this type of planning.

All you have to do to get started is answer a few questions about your current portfolio, savings and retirement timeline, and WiserAdvisor reviews its network to match you — for free — with up to three reputable advisors aligned with your specific needs.

You can then schedule no-obligation consultations with your matches to determine who is the best fit for your long-term goals. With their help, you may find that there are plenty of great accounts beyond your 401(k) that could give you the edge you’re looking for.

WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties, and specific financial results are not guaranteed.

Wealthy Americans are ditching the 401(k) plans used by 70M workers — here’s where their money is going instead

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