Women Identify as ‘Novice’ Investors: Closing the Gender Retirement Gap

The gender pay gap has been well-documented, with studies finding that women earn 82 cents for every dollar that men make. Although it may not be as well known, a gender gap in retirement savings can be detrimental to women long after they leave the workforce.

A recent survey by the retirement platform Guideline reveals the challenges that women face:

Women report feeling more overwhelmed and less in control than men regarding retirement. Nearly half say they are frustrated, 31% are frustrated, 30% are intimidated and 22% are confused. Just 17% say they feel in control, while 21% feel confident.

Women are saving less than men. It’s not just that women have more negative feelings about retirement than men. They also are less likely to be saving, and even if they are, they are saving less than men. Seven in 10 women say they are saving for retirement, compared with 80% of men. Although more than half of men save more than 10% of their income, only 36% of women do the same.

Women are more likely to consider themselves retirement saving beginners. Women were asked to self-identify as a novice, student, apprentice or expert, and they are twice as likely to identify as novice investors, who are:

• 4 times as likely as others to not have started saving for retirement;
• 9 times as likely to have never had a 401(k); and
• 6 times as likely to have never had an IRA.

However, women are less likely to overestimate their retirement knowledge: 54% of women and 72% of men say they know the difference between traditional and Roth IRAs. In reality, 50% of women and 52% of men actually do.

Employers and advisors can help close the gap, said Jeff Rosenberger, chief operating officer for Guideline.

“Setting up 401(k) auto-enrollment is the best possible option to increase financial preparedness and retirement planning equity across a workforce,” he said. “Auto-enrollment can take away the indecisiveness caused by the intrinsically confusing nature of our financial system and provide a seamless path to retirement savings, helping employees build their nest egg sooner so they can benefit from compounding interest over a longer time horizon. This is critical when you take into consideration how the gender pay gap is actively working against women’s ability to create long-term wealth compared to their male peers.”

Auto-enrollment can significantly increase participation, Rosenberger said.

“When 401(k) participation is voluntary, only 57% enroll; however, when a plan has auto-enrollment, 80% to 90% of employees participate and contribute,” he said. “Studies have even shown that when provided an automated default, employees embrace higher savings rates because they trust their employer will choose a contribution rate to help them save for retirement.”