Women Are Saving More, Borrowing Less from 401(k) Plans

Women increased their deferral rates at twice the level of men (an average increase of four basis points for women vs. an average increase of two basis points for men), according to MassMutual’s Retirement Services Division data for the first quarter.

In defined contribution plans administered by MassMutual, 4.22% of participants increased their deferral percentage in the first quarter, marking the second highest percentage in a single quarter since measurement began in 2007.

“Deferral percentages are up, with the greatest increase coming from Gen Y, and participants are letting their money work for them by avoiding loans, withdrawals and other behaviors that can have a negative impact,” said Elaine Sarsynski, executive vice president of MassMutual’s Retirement Services Division and chairman and chief executive of MassMutual International LLC.

Average deferral rates for the youngest savers (3.58%) are lower than they are for older participants (7.18%). Gen Y savings, however, are increasing at an accelerated rate.

 

 

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Participants age 29 and under increased their savings levels by 2.29% vs. participants age 60 and older who increased by just .42%. Participants aged 40 to 49 had the second highest savings level increase of .57%, to an average deferral rate of 5.27%. Also encouraging is that only 1.30% of participants overall decreased their deferral percentage during the quarter, and only 2.98% stopped deferring.

Women continue to favor age-based investments far more than risk-based options—more than 2.5 times as much—72% vs. 28%, respectively. Average account balances for women rose 7.93% for the quarter vs. 7.27% for men, and the gender gap is closing in terms of account balances. Average account balances for women now trail those of men by just 38.8%, compared with 40.5% in late 2010.

While recent industry reports have cited increased loan activity among plan participants in general, at MassMutual, the combined percentage of participants who initiated loans (1.26%) and hardships or other withdrawals (0.66%) was at its lowest level since 2007.

This data suggests that MassMutual participants understand that borrowing against their retirement savings account can have a negative effect on their efforts to achieve long-term retirement income success.

The quarter showed no significant difference in loan and withdrawal rates between men and women. Historically, women have taken greater percentages of loans and withdrawals. The declining rates for women also contributed to helping close the average account balance disparity between male and female participants.