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

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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.