Money Matters: Savings habits differ between sexes

By Marijoyce Ryan
The Daily Record Newswire

In my many years of working with 401(k) plan clients, I have noticed some general patterns — when providing educational seminars, men have often been more focused on savings levels and women have been more focused on  making sound investment decisions.

Earlier this year, an interesting study was released that focuses on savings patterns of men and women. Not surprisingly, the results demonstrated that men not only saved more, but also felt more confident about their retirement as a  whole.

Let’s look at some of the general findings:

Nearly 19 percent of women over age 65 who live alone also live in poverty, a trend that is expected to continue unless women make significant changes and take a more active role in their own financial futures.

The ability for women to construct a financially secure retirement is difficult due to the “wage gap” — women generally earn less than men — and women are more likely to be single parents, which often leads to time away from the workforce to be caregivers.

Women have longer life expectancies, therefore they also have a greater need for retirement savings.

Long-term studies have confirmed that men have a higher confidence level than women in their ability to retire comfortably. That is due to a host of factors, including life priorities, lower overall savings and lower levels of retirement-related education. Add to those the recent recession and stock market losses in 2008, and the focus on retirement has taken a back seat to simply surviving.

Since the recession began, both men and women have a reduced confidence in their retirements, however it increased somewhat for women in 2009. Both men and women expect to work longer than originally planned — a majority of both men and women indicate they plan to retire between 60 and 70 years of age, and a significant portion are planning on between 70 and 79 years of age.

While many women said they are saving less and spending less now, the study found that savings in 401(k) plans for the most part have not changed much — just a slight decrease.

The greatest financial priorities, cited by both men and women, are struggling to get by and covering basic living expenses (32 percent), and paying off debt (28 percent). Saving for retirement is listed as the next priority for both sexes, however.

In looking at sources of income in retirement, almost 30 percent of women cite Social Security as their anticipated primary source of income — a surprisingly high percentage compared to 19 percent of men. Of those who have retirement savings plans, the vast majority of men and women indicated they began saving in those plans between the ages of 20 and 29, and consider the plans to be a very important benefit. Currently, 32 percent of women and 23 percent of men have no access to an employer-sponsored plan — 401(k), 403(b), pension, SEP, SIMPLE, etc.

Another interesting observation is that, of both men and women with some sort of retirement savings, about 16 percent of participants have taken loans, and only about 3 percent have taken hardship distributions in the last 12 months.

When it comes to understanding how to invest their retirement funds, 74 percent of women said they do not know as much as they should, compared to 62 percent of men.

In my experience, upon receiving investment education women routinely ask more questions, which generally leads to better long-term investment allocations. When given the opportunity for investment education, most plan participants will take advantage of it.

In terms of savings aside from employer plans, 41 percent of women and 33 percent of men are either not able or choose not to save.

Women estimate that they need less in aggregate assets in retirement than men — which generally is not the case due to their longer life expectancies.

What can we do to help ourselves become better savers/investors?

Everyone, especially women, should save for retirement, and start early.

Learn about the risks of having inadequate savings. Consider the trade-off between retirement financial security and other life-related decisions.

Educate yourself on the basic principles of saving and investing. The combination of increased savings and appropriate investments can make a meaningful difference in the amount of assets one will have in retirement.

Get information about savings incentives such as the Saver’s Credit and Catch-Up Contributions.

Take advantage of employer-sponsored retirement education seminars.

Have a long-term perspective and stay with a good savings/investment program.

What else can be done to encourage retirement savings? The government could help all of us become better savers/investors by:
• Expanding eligibility/coverage for all employees, including part timers;
• Expanding the Saver’s Credit and promote it vigorously — the current income level is low and many employees simply are not able to take advantage of it;
• Expanding Catch-Up Contributions by increasing the dollar amount and/or decreasing the eligible age to 40 or 45.

Marijoyce Ryan, CPP, is vice president of fiduciary services for Karpus Investment Management and can be reached at (585) 586-4680.