As Investors, Women Have Unique Circumstances

Women face special challenges when saving for retirement, and their approach to investing is different from men’s, research shows.

Women in the workplace face special challenges. Over a lifetime’s career, they make less because of lower wages and sometimes stepping out of the workforce to care for children or parents. They lack confidence, but they are interested in saving and learning to invest for their futures.

Women could use a nudge to complete certain retirement planning activities, according to a report from the LIMRA Secure Retirement Institute. LIMRA research consistently shows that the top financial concern for both sexes is saving enough money for retirement (83% of women, compared with 77% of men). But women seem to have an especially difficult time getting ready for retirement, with just 20% of women surveyed saying they are comfortable with their level of financial knowledge.

According to a Vanguard survey, women are better 401(k) savers than men, but men’s average account balances are more than 50% larger. The report found women are 14% likelier to participate in their workplace savings plan and save at higher rates than men. Across all income levels, women save at rates that are 7% to 16% higher than men’s.

Investing styles for men and women are also different, with men likelier to kick back and relax about saving and investing, while women exhibit higher levels of anxiety. Most women—eight in 10—are concerned about saving enough for retirement, with the majority, 54%, saying they are “very concerned,” according to a study on women’s retirement planning perspectives by the Insured Retirement Institute (IRI).

Despite saving at higher levels, though, women’s balances are lower than men’s, with a FinancialFinesse analysis showing a 26% gap in the shortfall between men’s and women’s retirement savings. In general, working women will need to save more—and at a much faster pace—than men to satisfy the average cost of expenditures in retirement, the report advised.

NEXT: Some women are super savers

The report factored in median incomes, deferral rates, retirement savings, life expectancies, and projected health care costs to determine how much the median 45-year-old man and woman would need to save in order to replace 70% of their income in retirement.

Women are pretty competent at managing their finances and saving for retirement, but when it comes to judging their own performance, confidence takes a nosedive. A major finding of Fidelity’s Money FIT Women Study is that women greatly lack confidence in their own financial ability. They’re concerned they won’t have enough money to live on in retirement, but they want to learn, says Alexandra Taussig, senior vice president for marketing and business strategy at Fidelity Investments. Since most women will be solely responsible for their finances at some point in their lives, she notes, their willingness to step up engagement in active learning about finance is positive.

Some women, however, are bucking the trends, according to research from BlackRock, which identified a segment of “smart savers,” women who have accumulated five times the savings of all American women. This group holds an average $112,500 in savings, compared with a $21,200 median savings. Most have dedicated retirement savings, are likelier to invest in equities and hold less cash, and perhaps most important, these savers frequently engage with financial tasks and topics—the typical smart saver spends more than seven hours per month reviewing and making changes to their savings and investments, and 56% classify themselves as active investors.

It is possible The Women’s Pension Protection Act, introduced earlier in December by Rep. Jan Schakowsky (D-Illinois) and Senator Patty Murray (D-Washington), will strengthen women’s ability to save for retirement with a range of provisions, including increased spousal protections extended to defined contribution plans, an amended current minimum participation standard to boost retirement coverage for long-term, part-time workers, and grants to promote financial literacy for women of working or retirement age, among other proactive moves.