The share of women who are so-called “401(k) millionaires” is on the rise.
As of the end of September, about 20 percent of people with at least $1 million in their 401(k) accounts were women, The New York Times reports. That’s up from about 10 percent at the end of September 2005.
These figures are based on an analysis of 15 million 401(k) accounts under Fidelity Investments’ management.
Women who are 401(k) millionaires have a lot in common with men who have achieved the elite status, but one difference stands out.
401(k) millionaires: men vs. women
According to The New York Times, male and female 401(k) millionaires who earn less than $150,000 tend to share some similarities. Both men and women:
- Invest heavily in the stock market: The women put about 77 percent of their savings in stocks, compared with 76 percent for men.
- Become 401(k) millionaires in their late 50s: The women achieve the milestone at age 58.5, on average, compared with age 59.3 for men.
- Earn handsome salaries: The women make $117,000, on average, compared with $118,800 for men.
Additionally, men and women who are 401(k) millionaires and earn less than $150,000 have been saving for about the same amount of time — roughly three decades — and earn similar rates of return on their savings.
So, how has the percentage of female 401(k) millionaires doubled over the past 12 years? Jeanne Thompson, a senior vice president at Fidelity Investments, tells the Times:
“The biggest difference is that women are saving more.”
The average woman who has become a 401(k) millionaire while earning less than $150,000 is contributing 18.1 percent of her own salary to her 401(k) and earning a 6.8 percent employer contribution. That’s a total of 24.9 percent — compared with the average man’s total of 22.8 percent.
What everyone should learn from female 401(k) millionaires
The takeaway here — and hopefully, you already guessed it — is that you should contribute as much as possible to your retirement accounts.
You may have heard this advice before, but it’s critical enough to bear repeating. And it applies to everyone regardless of gender, age or income.
Maxing out a 401(k) retirement account — meaning contributing the maximum allowable amount per year — does require a decent salary or spartan spending habits.
For the 2017 tax year, you can stash up to $18,000 in a 401(k) if you are 49 or younger, or $24,000 if you are 50 or older. For 2018, these figures will rise by $500.
If you can’t set aside that much of your income, at least save enough money in your 401(k) to earn your employer’s full match if one is offered.
As Money Talks News founder Stacy Johnson explains in “Ask Stacy: How Much Should I Contribute to My 401(k)?“:
“That’s because employer contributions are free money — the greatest source of no-strings-attached dough most of us will ever see. You don’t have to be an expert in personal finance to realize when you’re offered free money, you should always take it.”
In that article, Stacy also breaks down how to figure out how much you must save in your 401(k) each year to earn the full amount offered by your employer.
To learn more about tax-advantaged retirement accounts like the 401(k), check out “Confused by Retirement Accounts? Roth, Regular IRAs and 401(k)s Made Simple.”
So, how is your journey toward 401(k) millionaire status going? Tell us what has helped you most by commenting below or on Facebook.