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Women Save More Than Men Before Retirement

It turns out that women rule the roost when it comes to saving for retirement.
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It turns out that women rule the roost when it comes to saving for retirement. Recent research by Vanguard shows that women are the ones signing up for 401(k) plans and saving a larger piece of their salaries, compared with their male counterparts.

"Women are better at this," said Jean Young, the study's author and a senior research analyst with the Vanguard Center for Retirement Research. "Men have more wealth, but that's the wage effect," because they earn more.

Vanguard looked at 720,000 workers who were eligible to sign up for their employer's 401(k) plan. The study found that women are 14 percent more likely to voluntarily take advantage of the pretax retirement savings accounts.

Women also are saving anywhere from 7 percent to 16 percent more than men, depending on income level.

The average account balance across all income levels for women was $79,572 vs. $123,262 for men. That imbalance is somewhat skewed, however, by large differences at the high-income range. Men's account balances don't beat out women's in the under-$100,000 crowd.

However, men in the study earn more. For instance, 45 percent of the women had an annual salary of less than $50,000, compared with 28 percent of the men.

Additionally, although women generally get a bad rap for being more risk-averse than men, the study shows that both genders allocate a similar amount of their retirement money to stocks (men, 74 percent; women, 73 percent).

"Men and women are investing more similarly than differently," said Young, who pointed out that both also have similar portfolio assets in index funds (men, 64 percent; women, 62 percent).

In looking at annualized five-year investment returns, the study found that men edged out women, 10.1 percent and 9.7 percent, respectively. The study points out, however, that at the high end of the risk-exposure continuum, men in the study were more likely to have greater stock exposure. That strategy proved beneficial during the five years ending 2014.

The study also found that more women (42 percent) than men (36 percent) use professionally managed portfolio allocations, such as target-date funds.

In other words, men are more likely to cobble together their own portfolio than choose a target-date fund or similar option that would put their allocation of stocks and bonds in the hands of someone else.

Similarly, many financial advisors observe that men are less likely to be long-term planners or to seek out a financial pro for help.

Jim McGowan, a certified financial planner with Marshall Financial Group, compares it to the stereotype that men won't ask for directions if they are lost but women will. He said the same applies when it comes to asking for financial advice.

"If you go to the doctor, you're not embarrassed to ask questions," McGowan said. "But men [seem] to think they should know everything that's going on in the financial world.

"We need to break that," he added. "Don't be embarrassed to ask for advice."

McGowan's firm offers a financial planning program called Wealth Coach that is geared toward younger people. Of the people who come to him through the program, very few are men, McGowan said.

"Women seem to plan ahead more," McGowan said. "When men have an immediate need, like if they are close to retirement, is usually when they come for advice.

"But women tend to plan much more for the long term and be on the right track from the very beginning."

It's not all bad news for men. A paper released last year from the Global Financial Literacy Excellence Center showed that while both men and women scored poorly on a three-question financial literacy quiz, men did better.

Just 22 percent of women surveyed for the study answered all three questions correctly, compared with 38 percent of men acing the quiz.

But the study points out that "men are more confident about their financial knowledge than they should be. That is, even when they were wrong, they reported being 'very confident' about their answers." Women, in contrast, were more likely to admit when they were unsure of the answer.

In other words, women, generally speaking, can ask for directions when they're lost and, it appears, financial advice.

Certified financial planner Austin Frye has a client in her early 30s who, working at the first job of her career, is already discussing the details of her retirement plan.

"Women are more security-oriented and better savers," said Frye, president and founder of Frye Financial Center.

He said that with married couples, he discourages having meetings with just the husband, because of the female habit of keeping expectations and risk level at rational levels.

Regardless of which gender does better with their finances, advisors and other pros in the financial industry stress the importance of signing up for a 401(k) and taking advantage of socking away pretax income through automatic payroll deductions at work.

But it apparently is easier said than done. According to the Employee Benefit Research Institute, workers participating in a workplace retirement plan stood at 46 percent in 2012.

"At the end of the day, what I hope is that more people of both genders [participate] in these plans if your company has one," Vanguard's Young said. "And save more."