A Wells Fargo study reveals key differences between men and women and their approach to managing their 401(k) plans.
Forty-three percent of men but only 39 percent of women are saving at Wells Fargo's recommended contribution index, which measures how many people are saving a minimum target of 10 percent, including the employer match.
Where gender was indicated, about half of men (49 percent) and four out of ten women (43 percent) are currently enrolled in their workplace 401(k) plan. Data was complied from 2,036 companies.
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Employees who have contributed to plans under Wells Fargo's advisement saw their average balance rise 19 percent in 2013, and 35 percent over the past two years combined, increases largely due to stock market gains.
"In general, all men and women need to take full advantage of their workplace retirement plan and embrace the 401(k) as the primary retirement benefit," said Joe Ready, director of Wells Fargo's Institutional Retirement and Trust. "In our view, if people have access to a 401(k) they should try to save at least 10 percent. The power of saving regularly, coupled with the compounding effect of time, can create a financial foundation for people that results in much greater retirement security."
The data shows that while fewer women are participating in plans, the ones that do are slightly better diversified, with 70 percent of women meeting minimum diversification levels compared to 67 percent of men. Wells Fargo defines minimum investment as at least two equity funds, one fixed income fund and less than 20 percent in employer stock. The difference in diversification could be explained by women's preference for managed investments: 74 percent of women have money in actively managed accounts, versus 71 percent of men.
Total assets in managed investment options were up to 26 percent from 22 percent throughout 2013. Fixed-income or cash equivalent are 18 percent 401(k) assets, down from 26 percent two years ago. Those who keep the entirety of their balance in a single, non-managed investment is down to 10 percent.
As accounts have increased with the stock market recovery, so too have 401(k) loans: 20 percent of survey participants now have outstanding loans, a 5.4 percent increase from two years ago.
Millennials were the biggest consumers of Roth 401(k) plans, not a surprise given they tend to be in lower tax brackets. Of the millennials surveyed, 15.3 percent are taking advantage of the Roth 401(k) structure that will allow them to draw money after retirement tax-free.
Wells Fargo provides employer-sponsored 401(k) plans to 4 million eligible employees.
Another study by Wells Fargo looked at the investment perspectives of affluent women, and showed that more than 40 percent are not very confident about their investing ability, and 34 percent find the stock market too risky for their appetite.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
