Women are less aggressive then men when it comes to saving for retirement, according to a new study.
Released by Spectrem Group, a Chicago-based research and consulting firm, the survey showed that women defer less salary to their company retirement plans, and they are less likely than men to qualify for maximum contribution matching. In addition, fewer women expect to have enough income to live on in retirement, compared with men.
The report, "Deferral Rate Decision Making," showed that its respondents contributed an average 7% to their company's retirement plan, with about half contributing 6% or more to the plan. Yet women deferred 6.3% of their salary to their retirement plans, while their male counterparts kicked in 7.6%.
A total of 404 plan participants were surveyed online during March and April, and the sample was stratified to create a balanced ratio of males to females. Just 40% of women expected to have enough income to live on in retirement compared with 48% of men, and just 77% of women contributed enough to earn maximal matching dollars, compared with 88% of men, the report showed.
SURPRISING RESULTS
It is a bit surprising that women are deferring less then men, said Cathy McBreen, managing director of Spectrem, because women tend to be more concerned about money.
"We usually find women are more cautious and more thoughtful. Usually, they're better savers," Ms. McBreen said.
Part of the issue could be the two-career households. The study showed that when both spouses have a retirement plan, often one spouse doesn't contribute at the same deferral rate as the other spouse.
The problem is, many couples think that contributing to one person's 401(k) plan is good enough, said Michael Deutsch, a certified financial planner, chief operating officer and chief compliance officer at Sovereign Wealth Management Inc. of Memphis, Tenn. His firm works with nearly 200 families and manages about $480 million in assets.
"When you're dealing with families, there tends to be a default to one of the retirement plans, and typically, it's the guy's," Mr. Deutsch said. "I think that's changing because you've got more successful women in the workplace."
Mr. Deutsch tries to encourage couples to both contribute as much as they can afford. "In general, I think they don't maximize both of the opportunities to set aside tax- deferred money," he said.
"They probably default to the husband's plan and max out that and then if there's anything left over, they go to hers. They're thinking it's all in one bucket," Mr. Deutsch said.
Many times, working couples tend to put most of their efforts into saving for retirement in the husband's plan, said Jim Suits, a CFP and president of Summit Capital Advisors in Tacoma, Wash., which manages about $40 million in assets.
"I think they tend to put the pressure on the husband's income," he said. "They tend to follow a traditional path and let the husband bear the stress."
Mr. Suits said he tries to encourage family clients to look closely at both 401(k) plans.
"If you want to load it up on his 401(k) plan, that's great," he said. "But let's make sure we get the best out of each plan first."
Women respond well to education, said Ms. McBreen, who thinks that if financial advisers show them why it is important to save as much as their parents did, women would be more likely to bolster retirement savings.
Advisers need to understand the differences that exist between men and women, and their financial attitudes, said George Walper, president of Spectrem Group. "Our experience is, advisers still don't understand that men and women act differently," he said.
But Mr. Deutsch said he tries to be gender-neutral and understand each client's investment philosophy, regardless of sex.
The study showed that four in 10 plan participants expected to have an income sufficient to live comfortably in retirement. Men under 40 and those with household income of $75,000 or more were the most likely to hold that belief.
The study showed that women tend to earn less than men and have a more difficult time than men in terms of funding retirement.
ECONOMY NOT A FACTOR
Despite the economic downturn, overall contribution rates remain the same, the report found. The average participant contributed about 7% of his or her salary to a company retirement plan — the same as in past research.
The study also showed that one in six eligible participants was making catch-up contributions. Of those not taking advantage of such contributions, 56% said that it was because they couldn't afford to do so, and 19% said they didn't feel it was necessary.
As expected, the study showed that older individuals are deferring more of their paychecks.
Those less than 10 years from retirement deferred an average of 7.7% of their salary, while individuals more than 20 years from retirement deferred 6.4%.
E-mail Lisa Shidler at [email protected].
