What is in the Retirement Accounts of Millionaire and UHNW Investors?
Roughly two-thirds of Millionaires and 55 percent of Ultra High Net Worth investors have an employer-sponsored defined contribution plan such as a 401(k), our research finds. What is the breakdown of these retirement accounts?
Asset Allocation, Portfolios and Primary Providers, our most recent wealth level study of Millionaire investors with a net worth up to $5 million (not including primary residence) finds that nearly 40 percent of their retirement accounts is comprised of equities, while 19 percent is comprised of fixed income investments.
Seventeen percent of Millionaires’ retirement accounts are comprised of investments about which they are unfamiliar, and roughly 10 percent are comprised of short-term investments and those identified as “other.” Five percent are identified as “alternative investments.”
Analysis across age groups finds that equities comprise roughly 40 percent of retirement accounts of Millionaire Gen Xers (39 percent), those ages 45-54 (37 percent), Baby Boomers (39 percent) and seniors 65 and up (40 percent).
Across all age groups, retirement account investment in fixed income is consistent between Gen Xers (19 percent), those ages 45-54 and Baby Boomers (18 percent each) and seniors (21 percent). Investment in short-term investments decreases with age, from 16 percent of the retirement accounts of Gen Xers to 9 percent of seniors.
An analysis of retirement account breakdown by net worth finds that investment in equities increases among wealthier Millionaires. Forty-three percent of the retirement accounts of respondents with a net worth between $3 million and $4.9 million are comprised of equities, compared with 37 percent of those with a net worth between $1 million and $1.9 million.
When we look at the breakdown of retirement accounts by occupation, we find that senior corporate executives have the highest percentage invested in fixed income investments (25 percent) and equities (46 percent).
Equities make up a larger share of the retirement accounts of Ultra High Net Worth investors with a net worth between $5 million and $25 million (NIPR), our study finds. Equities comprise half of these accounts while 20 percent is represented by fixed income investments. Roughly ten percent of UHNW retirement accounts is comprised of short-term investments and investments not known by the investor. Six percent are identified as “other” and five percent as “alternative investments.”
Interestingly, investment in equities declines with advisor-dependency, our report finds. Roughly 60 percent of the retirement accounts of self-directed investors (who make all of their investment decisions without consulting a professional) are represented by equities, compared with 49 percent of those who consult with an advisor for a specific person and 42 percent of those who
are fully advisor dependent.
When we analyze the retirement accounts of UHNW investors by occupation, we find that the highest percentage of equity investment (61 percent) is found in the retirement accounts of business owners, while senior corporate executives and professionals are most likely to have the highest percentage of fixed income investment (roughly 24 percent) in their retirement accounts.