Last week, I published an article on 401(k) balances for the "average" American, further broken down by both age and salary range. But I didn't reveal that one industry's average 401(k) balance is twice that of its closest competitor.
What surprised me was that it wasn't the technology or finance industry, which are both known for their plush benefits. According to Vanguard's 2014 report, "How America Saves" (link opens PDF), it was actually the employees of agricultural, mining, and construction (AM&C) companies that had the most robust 401(k) savings. Take a look for yourself, keeping in mind that because of the effect of outliers, median is usually a better gauge than mean.
The difference between AM&C companies and the rest is striking. The median 401(k) balance of AM&C employees is 70% higher than that of the next-closest industry, and the mean is more than twice as high as that of manufacturing.
Those who are familiar with lurking variables will be quick to point out a few obvious things that need to be taken into consideration. For instance, many companies now offer stock options as a way of compensating their employees. Such compensation can be lucrative, but it won't show up in 401(k) balances.
Furthermore, employee turnover in several fields -- especially technology -- can be rather high. Once someone leaves their job, they have the option to roll over their 401(k). In cases where workers did so, their previous savings were not counted by Vanguard.
But there has to be more to this 401(k) discrepancy
While I acknowledge that such lurking variables could play a role in the huge lead AM&C employees command, I wasn't convinced this was just a fluke. And it turns out I was right: When it comes to building a big 401(k), there's nothing like working for an agricultural, mining, or construction company.
In 2014, Bloomberg took on the arduous task of diving into many companies' annual SEC filings and determining what a new hire would be offered in terms of 401(k) compensation. There were two key factors that Bloomberg teased out: the maximum match that an employer offered and the maximum in "additional" contributions offered for participating in the 401(k) plan.
For instance, at the school where I used to work, we would get 3% of our salary added to our 401(k) just for participating (additional contribution), and the first 3% that we contributed would be matched. In essence, our employer was offering us 6% of our salary for free.
As you can see below, Bloomberg's results reflect what Vaguard found. When it comes to the largest players in wholesale and retail, like Home Depot (NYSE:HD) and even Amazon.com (NASDAQ:AMZN), "free" 401(k) money was hard to come by.
AM&C companies, on the other hand, are tripping over themselves to give their employees a comfortable retirement. Agricultural companies like Philip Morris (NYSE:PM) and Monsanto (NYSE:MON), as well as mining and energy companies like Devon Energy (NYSE:FCX) and ConocoPhillips (NYSE:COP), lead the pack.
The takeaway is pretty clear: If funding your retirement primarily through a 401(k) is important to you, consider look for work in agriculture, mining, or construction.
But I'm not in any of those industries!
If you're already in the working world and lack the interest or ability to enter these fields, don't fret. There are several simple steps you can take to save for a comfortable retirement.
The first, simplest, and by far most important step is to spend less than you earn. It may sound incredibly obvious, but you'd be surprised by how many overlook this step.
After you set up an emergency fund to cover several months' worth of expenses in case of financial hardship, do whatever you can to get the maximum company match in your 401(k).
After that, explore the pros and cons of opening up either a traditional IRA or a Roth IRA. Much like a 401(k), these retirement accounts offer tax advantages for long-term savers.
By following these three simple steps, you'll already be making huge strides to secure a comfortable retirement.