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Retirement planning: What women do right

Shelly  Gigante

Posted on November 12, 2022

Shelly Gigante specializes in personal finance issues. Her work has appeared in a variety of publications and news websites.
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Detail the reasons why women, who are typically less active investors, often enjoy higher portfolio returns

Explain why women have lower retirement account balances, despite their higher savings rate. 

Highlight the headwinds that women face in retirement planning, including fewer years in the workforce

Women, it seems, have the temperament and resolve to potentially manage their money more effectively than men, character traits that could help counter some of the significant financial headwinds against them as they seek to build a retirement nest egg.

Indeed, amid the reality of lower earnings potential and longer life spans, studies reveal women may plan ahead, earmark money for savings, and avoid costly knee-jerk reactions to stock market turbulence better than their male counterparts.

“Some research suggests men may be overly confident as investors and tend to do more active trading, which, of course, reduces long-term results,” said Alicia Munnell, director of the Center for Retirement Research at Boston College. “The ability to follow the rules, maintain a diversified portfolio, and stick with it without making spur-of-the-moment changes really works to women’s advantage.”

A 2022 study by Vanguard Center for Retirement Research, for example, found that women had participation rates (82 percent) in voluntary workplace enrollment plans that were roughly equivalent to men’s (81 percent). But the authors of the study note that a closer look at the data tells a different story. “Men and women appeared to participate at about the same level in 2021, but these overall averages fail to account for the income differences between men and women,” they wrote. For example, 88 percent of women earning $50,000 to $74,999 participated in their employer’s plan — compared with 81 percent of men in the same income group. Once enrolled, most also saved a higher percentage of their paychecks than men. While men had slightly higher elective deferral rates overall, because men at the lowest income thresholds out saved their female peers, women with wages above $50,000 had deferral rates that were consistently higher than their male counterparts.1

A 2021 Fidelity Investment analysis of more than 5 million investors over the last 10 years also found that women enjoyed better long-term investment performance when they did engage. On average, women outperformed their male counterparts by 40 basis points.2 (Learn more: What women get right in investing)

In a prior Fidelity study of women’s investing habits, the authors theorized that because women regularly juggle multiple priorities with work and family, and have natural instincts for planning, they may research investment decisions more carefully, ask questions, and seek professional financial advice, which collectively leads to fewer mistakes.

The COVID-19 pandemic, it seems, has encouraged women to develop and maintain even better financial discipline. A 2022 MassMutual study of consumer saving and spending habits found that 25 percent of American women said they started saving money for retirement or emergencies during the pandemic and almost all said they planned to continue saving after the pandemic ends.3 (Calculator: How much should I save for my retirement?)

Disciplined investing

As investors, women are more likely to stay the course during market downturns, keeping focused on their long term financial goals rather than trying to beat the market. They also maintain more balanced portfolios than men, which can potentially be beneficial during periods of market volatility, according to a 2022 Vanguard Research report on investor behavior.4

The data showed that women hold 23 percent more of their assets held in balanced funds and 12 percent more assets in target-date funds, which automatically adjust to become more conservative as their retirement date approaches. A balanced and age-appropriate asset allocation, which describes the mix of stocks and bonds in an investment portfolio, may help an investor's bottom line.

Women are also up to 50 percent less digitally active and trade up to 50 percent less often than men, Vanguard found. A buy-and-hold investment strategy potentially reduces the costs associated with portfolio churn, which eats away at annual returns, and also may limit the long-term risk of unsuccessful market timing — the attempt at buying high and selling low. (Learn more: Winning with a steady investment strategy)

Women have less saved

Despite the numerous ways that women excel on the financial planning front, however, they still fall woefully behind in terms of actual savings. On balance, men have amassed far more wealth than women.

The average account balance of male participants in defined contribution retirement plans, such as a 401(k), is $170,942, compared with $118,849 for women, according to the Vanguard study. Male participants have average account balances that are more than 50 percent larger than women’s, but the difference reflects men’s higher average wages, not superior retirement savings behavior. Controlling for income, women actually save more in defined contribution plans and have higher balances. 5

The American Association of University Women (AAUW) reports that women working full time in the United States are still paid 83 percent of what men were paid. That gap has narrowed since the 1970s, it reported, due to women’s progress in education, their workforce participation, and the fact that men’s wages have been rising at a slower rate.6

“Over the course of an entire career, that can amount to a $500,000 difference in savings,” said Nancy Coutu in an interview, a financial planner with Money Managers Financial Group in Oakbrook, Illinois. (Learn more: Ultimate savings guide)

It’s worth noting that the level of education is no equalizer when it comes to gender pay equality.

The AAUW found that workers in women-dominated fields are paid lower salaries than workers in fields dominated by men, even when the jobs require the same level of skill, education, and training.

The effect of lower earnings is significant. Not only does a smaller paycheck mean women have less money available to save, but they also get a quantitatively smaller employer match on their tax-deferred savings, which is typically based on a percentage of income.

At the same time, female workers who earn less than their male counterparts contribute proportionately less to Social Security over the course of their careers, which often translates to a smaller benefit when they retire. (A married woman who never worked outside the home may be entitled to up to one-half of her husband’s Social Security benefit.)7

Caregivers and higher costs

But other factors hamper women’s ability to feather their retirement nest egg, as well.

For starters, women spend more time out of the labor force, caring first for their children and later for aging parents, which means they have fewer years to fund their retirement.

“Women tend to be the caregivers in their families, raising children and then later in life taking care of Mom and Dad,” said Julie Bates, a financial planner with Delta Community Credit Union Retirement & Investment Services in Atlanta, Georgia, in an email interview. “We see this role impacting career advancement opportunities, retirement savings, and Social Security benefits.”

Women also have a longer life expectancy than men. The Centers for Disease Control and Prevention reported that women born in 2021, the most recent year for which data are available, live to an average age of 79.3 years, versus men who are projected to live to age 73.5 years.8

Thus, women often have greater expenses during retirement, including more medical and long-term care costs — especially if their spouse is no longer alive to help provide care. (Learn more: How caregiving roles have changed)

“The combination of longer lives, limited savings, and the fact that we’re probably going to live alone in old age puts women at much higher financial risk during their retirement years,” said Coutu.

She noted, too, that many married women forget that they lose one Social Security check if their husband dies.

“You may be collecting $5,000 a month in the early years of retirement between you and your spouse, but if one of you dies you lose one entire check, which may be 50 percent of your fixed income,” said Coutu. “It’s not like your bills suddenly go down by half.”

Munnell said one of the best ways women (especially those who took a few years out of the labor force) can mitigate the financial effects of an underfunded nest egg is to delay claiming Social Security benefits beyond their full retirement age, which increases their monthly benefit for life. (Learn more: 4 simple ways to delay Social Security)

“By delaying benefits, you not only raise your monthly benefit, but it also raises your average wages on which your benefit is determined,” she said. “You can offset some of those years when you contributed zero to Social Security so your benefit will be bigger. The effect of that is significant.”

Women face significant financial obstacles on the road to retirement security, to be sure. By bringing their discipline and investment strengths to bear, however, they can potentially offset some of those challenges and set themselves up for a more successful savings outcome.

Many already are.

“More and more women are asking for help, getting involved in their family finances early, and using their longevity to improve their financial future,” said Bates.

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This article was originally published in March 2017. It has been updated.


1 Vanguard, “Women versus Men in DC Plans,” Oct. 2019.

2 Fidelity Investments, “2021 Women and Investing Study.”

3 MassMutual, “MassMutual Winter 2022 Consumer Saving and Spending Index.”

4 Vanguard, “The Same but different: Gender and investor behavior in Vanguard accounts,” May 2020.

5 Vanguard, “Women versus Men in DC Plans,” Oct. 2019. 6 AAUW, “The Simple Truth about the Gender Pay Gap,” 2021. .

7 Social Security Administration, “5 Things Every Woman Should Know About Social Security,” June 2021.

8 Centers for Disease Control,“ Mortality in the United States 2020,” .


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