Men Trump Women in Retirement Savings Rates

April 2, 2014 ( - Men have a slight edge over women when it comes to saving at the recommended 10% rate for retirement, according to research from Wells Fargo, but both genders still fall short of the goal.

Slightly more men than women (49% versus 43%) are enrolled in their workplace retirement plan, the data also shows. Wells Fargo based its findings on the more than four million eligible employees for whom the firm provided an employer-sponsored 401(k) plan in 2013.

According to Wells Fargo’s recommended contribution index, which measures how many people save a minimum target of 10% in their 401(k) plan, including employer match, nearly half of men (43%) contribute at this rate, compared with just 39% of women.

However, women might be investing more wisely, the data suggests. Although fewer women participate in plans, the investments they choose appear slightly more diversified. Nearly three-quarters of women (70%) meet a minimum level of diversification in their 401(k) account investments (defined as a minimum of two equities and a fixed fund and less than 20% in employer stock), versus 67% of men. The difference has been stable for the last two years. One potential driver of this difference in diversification is the use of managed investment options, as 74% of women have money in managed investments, versus 71% of men.

Balances are on the rise, but so are 401(k) loans. Twenty percent of participants now have an outstanding loan, up from 19% two years ago. Twenty-six percent of participants who left their employers in 2013 cashed out their 401(k) accounts, versus leaving their balances in the plan or immediately rolling over to IRAs.

Usage of Roth 401(k) plans increased, from 8.6% of participants, to 10.4%—a gain of 1.9 percentage points, or 22% from two years ago. Millennials are the biggest users of the Roth 401(k), which takes after-tax contributions and allows participants to withdraw funds tax-free in retirement. About 15.3% of Millennials use a Roth 401(k), up 2.4 percentage points from the previous year.

Diversified Balances Rise

The number of participants with a balance that is diversified across a variety of asset classes is up 4.2 percentage points over the past two years (2.1 percentage points in 2013). The increase in diversification is due to higher adoption rates of managed investment options.

The percent of participants who have some money in a managed option has jumped 4.9 percentage points over two years and 2.2 percentage points in 2013. The use of managed investments is highest among new hires and lowest among long-term employees, which could be because of the trend of using target-date vehicles as a default investment option. The change in recent years to using managed investments (especially target-date funds) is having a real impact on participant diversification, Wells Fargo says.

Total assets in managed investment options are up to 26% from 22% during the course of 2013. Fixed-income investments or cash equivalents now represent 18% of 401(k) assets, down from 26% two years ago. The percent of participants who do not use a managed investment option and have their entire balance in a single investment is down to 10%, from 12% two years ago.

“In general, all men and women need to take full advantage of their workplace retirement plan and embrace the 401(k) as the primary retirement benefit,” explains Joe Ready, director of Wells Fargo institutional retirement and trust. Those with access to a 401(k) should set a goal of saving at least 10%, Ready says, to save regularly and take advantage of the compounding effect of time.

Wells Fargo’s data is compiled from 2,036 companies for which gender was indicated in participant responses.