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David Lerner Associates: Gender Gap Extends to 401(k) Plans

Studies have indicated that a gender gap exists between men and women when it comes to overall financial literacy. Financial Finesse, which conducts research on financial trends, has reported an average gender gap of 15 percent in the answers to key financial wellness questions grouped into seven different financial planning topics.

Now, a new study conducted by Wells Fargo & Co. reports that there is also a gender gap between men and women when it comes to participation in 401(k) retirement plans. According to the study, 49 percent of men are enrolled in a workplace 401(k) plan, compared to just 43 percent of women — a 401(k) participation rate gap of 4 percent.

“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,” said Wells Fargo Institutional Retirement and Trust’s Joe Ready. “The power of saving regularly, coupled with the compounding effect of time, can create a financial foundation for people that results in much greater retirement security.”

When narrowed down further to how many men and women are saving at least 10 percent of their income in a 401(k) plan, 43 percent of men are saving this much, compared to just 39 percent of women, for a gender gap of four percent.

While these gender gaps might not seem like a lot, they can add up to tremendous lost opportunity for women. This is especially true when you consider that the average 401(k) plan balance rose by 19 percent and 35 percent, respectively, over the past two years as the financial markets picked up steam in the aftermath of the financial crisis, according to the Wells Fargo study.

The study also determined that men tend to be more aggressive with their 401(k) investments than women. Women, on the other hand, are generally less comfortable with investing and are more likely to spread their 401(k) money among different asset classes — or in other words, to diversify their 401(k) investments.

This is not too surprising, given that men in general tend to have a higher tolerance for investing risk, and are more comfortable with investing, than women, many financial experts say. In contrast, women are generally more cautious when investing their money.

Some financial experts say these attitudes are a holdover from previous generations when women who worked were secondary family earners. Often, their income was used primarily for discretionary purposes, while retirement savings came out of their husbands’ income. As a result, husbands were often the primary decision makers when it came to managing retirement savings and deciding how the money would be invested.

However, this is no longer the case in many American households today. In fact, a study conducted by Prudential Financial found that a majority of women are now the primary breadwinners in U.S. households.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC

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