Women Are Better 401(k) Savers Than Men

Vanguard examined women’s and men’s 401(k) savings behavior and found that women are better savers but trail men in outcomes.

Women are 14% more likely than men to participate in their workplace savings plan and save at higher rates; women earning less than $100,000 save 20% more than their male counterparts, and across all income levels, women save at rates that are 7% to 16% higher than men’s.

In plans that automatically enroll participants, men and women participate at the same rate. This suggests that men benefit from auto features, Vanguard says. However, lower-wage earners see the largest improvements from auto enrollment, and 60% more women fall into the lower-income bands than men.

“Autopilot features are undoubtedly the great equalizer, but we’re not seeing a rapid convergence of men’s and women’s participation and savings rates,” says Jean Young, senior research analyst at the Vanguard Center for Retirement Research. “Women absolutely demonstrate a conscious inclination towards savings and, even with a higher proportion of women earning lower wages, the tailwind of auto enroll has maintained that savings lead.”

The only category in which men outsaved women was in auto enrollment plans, with men deferring at rates 5% higher than women. Vanguard also found that higher-income participants tend to override default features. Vanguard attributed this to the fact that men’s average wages are 25% higher than women’s and their median wages are 33% higher. And despite women’s higher savings rates in non-auto enrollment plans, the fact that men earn so much more than women affects their balances, Vanguard says.

NEXT: Investments held

Vanguard found that contrary to widely held beliefs that women are far more risk-averse than men, men and women tend to invest in the same level of equities. That said, women are less likely to invest in company stock and more likely to gravitate to balanced investment allocations.

As of year-end 2014, 42% of women held a single target-date fund and, on average, held 52% of their account balances in target date funds. In aggregate, 17% more women than men owned a single target-date fund. Women also traded about one-third less frequently than men, with only 7% of female participants trading in 2014.

Over the past five years, men earned an average of 10.9%, compared to 10.6% for women. Nonetheless, men’s average and median account balances are more than 50% higher than women’s.

“With persistent and undue criticism of the 401(k) system, it is important to note that the data reflects current labor market realities, and defined contribution plans are not driving this gender retirement savings gap,” Young says. “More important, however, is the lingering suboptimal savings rates on the part of all participants—regardless of gender.” Young notes that Vanguard recommends saving 12% to 15% of one’s salary each year, including employer contributions.