Nevenka Vrdoljak is a Managing Director for the Chief Investment Office at Merrill and Bank of America Private Bank, and Susan Feng is a Director for Global Risk Management at Bank of America. Opinions are the authors’ own as of the date of the report and subject to change.
Women looking ahead to retirement face the same worries and concerns as do men: not having saved enough, outliving their assets, losing a spouse, and needing long-term care. Although women are covered by the same employee benefits as men are, women live longer on average, are more likely to be caregivers, and may spend their last years of life alone. With this in mind, their diverging life paths heighten the importance of examining the decisions women make as they plan for retirement.
To examine these issues, we recently posted an in-depth study we conducted on 4.8 million 401(k) plan participants in Bank of America’s record-keeping systems. Of particular interest are participants’ financial behavior and gender differences in plan participation and contribution rates, investment allocations, loan balances, hardship claims, and 401(k) balances. We also offer access to education for retirement planning, with a special focus on considerations for women.
Key Findings
Our main takeaways from examining participants over the period 2019 to 2023 are the following:
- Women’s plan participation continues to be slightly lower than for men. In 2023, for instance, 64% of women workers contributed to their plans, versus 67% for men. Generation Z (18.6%) had the lowest participation rates. Millennial women (59.6%) participation rate is lower than Millennial men (63.4%). Unfortunately, this reverses a trend we saw pre-pandemic, where Millennial women participation rates were higher than those of Millennial men.
- Women and men save in their 401(k) plans at roughly similar rates. Contribution rates for women and men are comparable, at the 25th, 50th, and 75th percentiles. The percentage of women participants contributing relatively little, 1-2% of their pay, is greater than for men.
- Women allocate less of their retirement money to stocks. Average equity allocation for women is 78%, versus 83% for men. Among Generation X and Baby Boomers, women allocate 3% and 10% less to equity, respectively. The most notable difference is among Baby Boomers, for whom women’s equity allocation is 58% versus 69% for men.
- Women continue to claim hardship and take 401(k) loans more often than do men. Women’s 401(k) loan balances are higher for men, and women borrow relatively more of the retirement accounts. More women also claim hardship, in order to borrow from their plans, than do men. One positive finding is that the fraction of people taking hardship loans is declining, post-pandemic.
- Women’s median 401(k) balances are lower than those of men, though the gap is narrowing. In 2019, women’s plan balances were 36% below men’s, and in 2023 this fell to a 28% gap. For 2023, the median 401(k) plan balances are $14,716 for women versus $20,434 for men. Relative differences between women and men are greatest for the older groups. Among Baby Boomers in 2023, women’s median balance was $28,491, about half of men’s, at $53,090. In contrast, for Millennials, women have about two-thirds as much as men.
Tips to Help Bolster Retirement Preparedness
Both women and men concerned about retirement wellbeing, along with the employers who design 401(k) plans to help employees meet these goals, would do well to integrate the following points into their programs:
- Starting early to prepare for retirement is important;
- When possible, maximizing 401(k) plan contributions to earn the full match can be valuable;
- Learning more about investment risk and return can help guide retirement contribution and investing choices;
- Borrowing from the plan can erode retirement wellbeing; participants should consider the advantages and disadvantages of taking a loan before initiating one.
Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.
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