The gender pay gap in the U.S. has remained relatively stable over the past 20 years. As a result, women’s retirement savings and financial confidence are suffering.
A new study by 401(k) platform Guideline—which surveyed 1,000 U.S. respondents from 18 to 67-years-old—found women report feeling more overwhelmed and less in control towards their retirement savings than men. Women were likely to report feeling overwhelmed (48%) compared to 27% of men. They were also likelier to experience feelings of frustration (31% vs. 21%), intimidation (30% vs. 18%), and confusion (22% vs. 9%).
On the other end, men were likely to feel in control (30% compared to 17%) and confident (33% relative to 21%).
As a result, women are saving less than men with 69% of women disclosing that they’re currently saving for retirement, compared to 80% of men. Fifty-five percent of men save over 10% of their income, while only 36% of women claim the same.
One key driver behind the difference—aside from the gender pay gap—is confidence, finds Guideline. According to the survey, women were nearly two times as likely to self-identify as novice investors, while men were likelier to overestimate their retirement knowledge.
For example, 72% of men were confident they knew the difference between traditional and Roth contributions, yet only 48% answered correctly. This compared to 54% of women who claimed they knew the difference, of which 50% did.
A large driver of retirement savings attitudes comes from accessibility and whether employees can afford to save. Once workers have the funds available to save, adding employer-sponsored retirement benefits can increase savings.
According to Guideline, workers with an employer-sponsored retirement benefit are 2.5 times as likely to be saving for retirement and those with an employer contributing or matching their savings are 1.4 times as likely to save.
Specifically, an automatic enrollment feature serves as an added bonus that eases retirement savings for participants, says Jeff Rosenberger, COO at Guideline.
“Our view is that if you have automatic enrollment, you help people get started. They can always choose to opt out, but by default, they have to enroll in the plan, and we believe that has a great, democratizing effect across the workforce,” he said. “There is also a positive impact among people who historically were more reluctant to save, whether that’s by women who feel less confident with investing, workers of color, younger workers, etc.”
Additionally, engaging workers with financial wellness and retirement savings literacy can help meet workers where they are and help them improve their financial and retirement confidence. “We’ve seen that’s a better way to get workers engaged around retirement. We think automatic enrollment is an impactful lever for broadening inclusivity of the retirement system and including the gender dimension,” Rosenberger added.
Factors to increase 401(k) plan adoption
As Millennials make up the largest generation in the U.S. workforce, Rosenberger anticipates their outlooks on benefits to influence employers. This, combined with a tighter labor market than in years past, weighs on employers to offer competitive benefit options.
“Employers, whether big or small, have needed to compete more for talent,” Rosenberger said. “Having an attractive benefits package, including retirement, is a really important thing.”
Additionally, increased 401(k) adoption will continue as states require small businesses to establish a retirement account, whether that includes a private retirement plan or a state-run auto-individual retirement account (IRA). A December report by Pew Charitable Trust found significant growth of new 401(k) plans in states that have adopted auto-IRAs.
In the one year after the first three auto-IRA programs launched—Oregon’s OregonSaves in 2017, Illinois Secure Choice in 2018 and California’s CalSavers in 2019—there was a 35% higher growth rate among new 401(k) plans at private businesses in those states compared to other states.
Lastly, the SECURE Act of 2019—and most recently SECURE 2.0—incentivizes small business employers to offer retirement plans using tax credits, and may thus increase savings among workers, including women. At Guideline, Rosenberger says the platform helped enact 30,000 new 401(k) plans throughout 2020, 2021, and 2022.
“We’ve really seen an explosion of that over the last three years,” he said. “A confluence of those three factors is accelerating new plan creation.”
SEE ALSO:
- Gender Pay Gap Affects Women’s Retirement Savings
- State IRA Programs Boost Private 401(k) Plan Adoption
- Tax Credits Under SECURE 2.0 Expand Small Business Coverage
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
