Women live longer, and thus can be expected to have higher retirement savings needs. But are women and men really different when it comes to retirement plan savings?
According to a new analysis of participants recordkept by Vanguard, women are 11% more likely to enroll in their workplace saving plan. In plans with voluntary enrollment designs, women are 14% more likely to join the plan than men. In plans with automatic enrollment, both women and men have higher participation rates than women and men in voluntary enrollment plans, and both women and men participate at the same rate.
Women earning less than $100,000 have participation rates that are about 20% higher than men, and even at incomes of $100,000 or more, women are more likely to be participants (91% versus 87%).
Savings Rates
Even once enrolled, women across all income levels save at rates that are anywhere from 7% to 16% higher than those of their male counterparts, according to Vanguard. Many factors affect deferral rates, of course, and Vanguard modeled the relationship between deferral rates and several factors using a multivariate regression, including wages, age, tenure, plan design and gender. However, when controlling for all of these factors, women do have predicted deferral rates that are 3% higher than men. In plans with voluntary enrollment designs, women have deferral rates 6% higher than men. However, in plans with automatic enrollment designs, men have deferral rates 5% higher than women.
Despite a commonly held view that women are more risk-averse than men, equity allocations for women and men are similar in their DC plan accounts, with women and men holding average equity allocations of 73% and 74%, respectively. Some differences were noted; men are somewhat more likely to hold employer stock than women, and women are more likely to hold any target-date fund exposure. Nearly half of women have adopted professionally managed allocations, and 17% more women than men held a single target-date fund in their retirement plan account.
Few participants made transfers in their account in 2014, though women traded about one-third less frequently than men.
Average, Median Balance Gaps
Despite these positive behavioral differences, Vanguard notes that the average account balance of male participants was $123,262, while the average account balance for female participants was $79,572. The median account balance of male participants was $36,875, while the median account balance for female participants was $24,446. Indeed, male participants have average and median account balances that are more than 50% higher than female participants.
Vanguard notes that the difference is not due to savings behavior but the higher wages of men. In fact, Vanguard explains that in these plans, men have wages that are about 25% to 33% higher than women. Controlling for income differences, Vanguard found that the account balances of men and women tend to converge. However, at the highest income band, men still have higher account balances than women, due to higher wages as well as somewhat longer tenure among men at this wage level.
Consequently, while female participants may already be predisposed to do the right things, certainly in comparison to their male counterparts, advisors still have work to do in helping them save toward higher goals.
