Helping Women Become ‘Smart Savers’ Closes Gender Gap

Women could help close the sizable gender-based savings gap by taking a cue from the segment of women investors who are successfully planning for their retirements, BlackRock research finds.

Identified by the firm as “smart savers,” a category consisting of women who have accumulated more than five times the savings of all American women, BlackRock says this elite group of investors has a thing or two to teach the rest of the investing public. They hold $112,500 in average savings, compared with a $21,200 median savings figure for all women polled for the Global Investor Pulse Survey.

The BlackRock survey finds these smart savers are distinctive from women overall in exhibiting positive financial behaviors which have helped them close the gender gap. Most in this group (82%) have dedicated retirement savings, compared with the wider U.S. figure of 59%. They are also more likely to invest in equities than the U.S. average and hold less cash, BlackRock says.

Further, the Global Pulse Survey shows these smart 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. Finally, smart savers plan more aggressively and seek advice, with twice as many as the general population seeking input from a professional financial adviser.  

Hollie Fagan, head of BlackRock’s registered investment adviser (RIA) business, tells PLANADVISER there is a pressing need for retirement plan sponsors and service providers to push more women to become smart savers. Getting more women to invest more aggressively will not only improve plan performance metrics—it’s right thing to do, Fagan says, given that women have longer anticipated lifespans than men, and most will be the lead household financial decisionmaker at some point in their lives.

“In the U.S., just 53% of women overall have started saving for retirement, compared with 65% of men,” she notes. “These numbers are too low for both groups, but for women especially this is a pressing problem that can be overcome through more financial training and programs focused on engaging women with retirement programs.”

Even among those women who have started saving, Fagan says they have accumulated on average less than half the retirement savings of men, or about $34,900 versus $76,800. There is also a gap in investing outlook behaviors—whereas close to half of men (45%) say they take on higher risks in order to achieve higher returns, this falls to just 28% of women.

“Also, for women investors, cash represents greater proportion of their total investments than men, 68% compared to 59%,” Fagan observes. “Blessed with longer lives, it’s all too likely women will come to find that the retirement years last longer than they had planned. With lower savings rates and less willingness to take risks, many women are faced with greater financial obstacles in retirement than men.”

Fagan notes that the Global Pulse Survey shows more and more women are becoming engaged investors, especially Millennials entering the work force. For older women, reduced employment due to childcare obligations seems to have a significant impact on their ability to save successfully for retirement. For example, only about half of women ages 25 to 44 are working full-time, compared with more than three-quarters of men in that age group, BlackRock says.

“Though the proportion of middle aged and older women saving for retirement begins to match those of men, it’s too late to make up for the late start, so women enter pre-retirement with less saved,” Fagan says.

The Global Pulse Survey finds American women ages 55 to 64 with retirement savings have accumulated just $81,300, compared with $118,400 for men in that age range at the median. This gap is particularly troubling given that women live longer than men, BlackRock says, with the life expectancy for U.S. women in this age category at about 79, compared to 72 for men.

BlackRock notes that these problems stand to either be alleviated or exacerbated in the coming decades by lengthening lifespans, which give either more time to get ahead or to fall behind on retirement savings, depending on whether women are successful at getting more financially engaged.

“In the first revision of mortality assumptions since 2000, the Society of Actuaries estimated the average 65-year-old man today will live 86.6 years, up from the 84.6 it was estimated a decade and a half ago,” BlackRock’s survey report explains. “The average 65-year-old woman will live 88.8 years, up from about 86.4. While this accounts for approximately two years longer, it’s important for women to realize that this is the average and their finances may need to last 10 years or more than men.”

Putting a positive spin on the survey data, Fagan notes that the savings habits of Millennials indicate young women are handling finances more frequently. For example, Millennial women are twice as likely as Baby Boomer women to describe themselves as active investors (31% vs. 15%), and they are nearly twice as likely to say that they are willing to take on higher risks to achieve higher returns (41% vs. 22%).

However, younger women continue to lag behind their male peers in terms of interest in investments, willingness to take investment risk to achieve higher returns, and perhaps most importantly, likelihood to enjoy managing investments, Fagan says.

“Only 36% of Millennial women claim to enjoy managing their investments, compared to 70% of Millennial men,” she notes. “When it comes to saving and investing, women can get sidetracked as other obligations develop. They can do better by adopting good financial habits early in life, setting their own goals, finding the support they need to stick to those habits over the long run, and learning from the example of women who are successfully taking charge of their financial lives.”

The BlackRock Global Investor Pulse survey interviewed 27,500 respondents in 20 nations, including 4,000 respondents in the United States.