When it comes to retirement accounts, 401(k)s represent a massive source of wealth. There are roughly 70 million Americans who hold a 401(k) account, amounting to $7.4 trillion worth of assets.

This year, National 401(k) Day takes place on September 6, a great time to familiarize yourself with this popular retirement account or check in on your existing 401(k). At Peak Financial Group, we work with high-net-worth individuals and executives to create unique and diversified retirement plans. Here’s why we often find a 401(k) is one of the best tools to help executives achieve their financial goals.

How 401(k)s Work

You probably already understand the basics of a 401(k). These plans are employer-sponsored, meaning they’re typically offered as an employee perk. There are two types of 401(k) plans: traditional 401(k)s, which are funded with pre-tax income and are taxable upon withdrawals, and Roth 401(k)s, which are funded with post-tax income and are tax-free on qualified withdrawals (must be age 59 1/2 and the account must be open for 5 years or longer).

Some employers match employee contributions to the plan, essentially giving their employees money in addition to their regular salary. In 2023, the average employer match was 4.6 percent of an employee’s salary, according to Vanguard.

Unsurprisingly, given this system of employer matching, 401(k)s remain one of the most popular retirement accounts for Americans. According to one report, in 2023, 74 percent of employers offered immediate participation in a 401(k), while 59 percent offered automatic enrollment in a plan.

Checking in on Your 401(k)

As National 401(k) Day rolls around, it’s a good time to check in on your current 401(k) — or even track down a lost 401(k).

While it may seem hard to believe, losing track of a 401(k) account is not that uncommon. By some reports, there are nearly 30 million lost 401(k) accounts, containing a total of $1.65 trillion worth of assets.

Fortunately, there are ways to track down lost 401(k) accounts. You can write to your previous employer for information on your past plan. Alternatively, the state where you were working likely maintains an “unclaimed property” database, which may have records of the account.

401(k)s and Executive Compensation Strategies

 At Peak Financial Group, many of our clients are high-net-worth (HNW) individuals and executives with unique compensation packages. Still, a 401(k) remains a tried-and-true savings plan, with many HNW individuals having over half their wealth in either 401(k)s or IRAs, according to CNBC.

Because 401(k)s have such a high annual contribution limit — in 2024, $23,000 for those below age 50 and $30,500 for those 50 and up — they’re an appealing tool for executives, who are more likely to be able to max out their contributions every year. This doesn’t account for employer matching, either. All told, the maximum annual contribution for a 401(k) in 2024 — including individual contributions and employer matching — is $69,000 for people below 50 years old and $76,500 for people 50 and above.

For executives, a 401(k) has yet another major appeal: If you withdraw the money after retirement, your taxable income on the 401(k) withdrawal may be lower than if you had kept the money as ordinary income when you were working and in a higher tax bracket.

Take Action in Your 401(k) Planning Strategy

A 401(k) is the bedrock of retirement planning for many Americans. Still, these plans might seem more complex on the surface, especially for executives and high-net-worth individuals. Our team at Peak can help navigate this terrain to help maximize your hard-earned wealth with the type of retirement savings account(s) that are right for you.

Securities and investment advisory services offered through Osaic FA, Inc., member FINRA/SIPC. Osaic FA is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic FA. 

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