Battle of the Sexes: Here’s How Men and Women Differ in their 401(k) Savings

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Men and women generally save for retirement in different ways. Here’s how they compare and why that matters. 

When it comes to saving for retirement, there’s no such thing as one-size-fits-all. Your age, income, and financial literacy can all play a role in how you put money aside for the future. And according to new data from Vanguard, your gender could also have an impact. Let’s take a look at how men and women save differently, and what that could mean for you.

Women are more likely to opt in

In retirement plans, like in many other areas of life, participating is half the battle. And when it comes to enrolling in a 401(k) plan, women appear to have men beat.

At all earnings levels, women are opting into 401(k) plans at a higher rate than men. Evidence shows that across the earning spectrum, women are about 3% more likely than men to voluntarily defer their income into workplace retirement plans. And at lower income levels, the gap is even larger. At salaries of under $50,000 per year, women were between 9% and 13% more likely to enroll in 401(k) plans.

Even in automatic enrollment 401(k) plans, where participants must manually opt out, women hold a slight lead in participation. Evidence suggests that about 93% of employees will participate in such a 401(k) plan. However, women hold a 1 to 2 percentage point higher participation rate across income levels.

Men are more likely to trade

401(k) savers typically have a variety of options when it comes to investing their account contributions. And while these may not be the high-risk investments that are available in brokerage accounts, participants can readily buy and sell investments in their retirement accounts.

Saving for retirement can be a multi-decade affair. And for some, investing in a target date fund appears to be the perfect way to take the work out of retirement saving. A target date fund gradually invests in more conservative holdings over time, in order to match the changing risk tolerance of a saver nearing retirement. The data suggests that women are between 5 and 6 percentage points more likely to invest their 401(k) balances in a single target date fund.

Generally, those target date fund investors are unlikely to trade over the course of a given year. On the other hand, savers using other investments inside their 401(k)s may have to occasionally rebalance their holdings to reflect their changing risk tolerance. Therefore, it may come as little surprise that women, who are more likely to use a single target date fund strategy, are less likely to trade in their brokerage accounts than men.

Behind the 401(k) balances

The same data also shows a stark difference in 401(k) account balances among male and female employees. Across all employees, the average account balances of men were nearly 50% higher than those of women. The difference is attributable largely to the wage gap between men and women in highly compensated roles.

According to the data, 401(k) balances between men and women earning under $150,000 per year are similar. However, above this income level, the average male employee has nearly $120,000 more saved in their 401(k). Men’s wages, and by extension their retirement account deferrals, tend to be about one-third higher than their female counterparts. And over a decades-long career, those lost savings can make a significant difference in an account balance.

How you save for retirement can be influenced by many different factors, but ultimately the decisions you make today will affect you throughout retirement. So, while your gender might indicate how statistically likely you are to enroll in a savings plan or how you might invest your hard-earned dollars, that doesn’t tell the whole story. Instead, a wise investor will recognize that a bright financial future depends on intentional actions today.

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