Men participate less often in 401(k) plans than women, unless they are automatically enrolled

Personal finance

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Some men may need a bigger push than women when it comes to participating in their workplace retirement-savings plan, new research suggests.

In 401(k) plans with automatic enrollment — meaning employees must opt out if they don’t want to participate — 93% of both men and women remain signed up, according to a report from Vanguard. But in plans whose enrollment is voluntary — workers have to actively enroll — men lag behind women in participation rates at all income levels, most notably below $150,000.

The largest difference is in the $50,000-to-$74,999 income range, with 81% of women participating versus 67% for men.

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“The savings behavior of women is on par or in some cases … better than men,” said Dave Stinnett, head of strategic retirement consulting at Vanguard. “It just doesn’t get reflected [in account balances] because men have higher incomes.”

Men earn more and save a larger share of it

The average 401(k) balance among men in 2021 was $93,512, compared with $70,037 among women, the Vanguard research shows.

In part, that’s because men have a higher average deferral rate — the percentage of income put into the plan — of 7.5%. For women, it’s 7%.

Men also earn more, so that higher deferral pulls in more cash. For every dollar earned by men working full-time, women earn 83.4 cents, according to recent data from the U.S. Bureau of Labor Statistics.

Both men and women benefit from auto-enrollment

In auto-enrollment plans, women also remain as participants at a slightly higher rate than men in the under-$150,000 income range, although the difference is not more than 3 percentage points in any given income bracket, according to the Vanguard research. 

Overall, however, both women’s and men’s participation rate — 68% and 65%, respectively — in voluntary enrollment plans is much lower than the 93% rate in auto-enrollment plans.

Auto enrollment is considered one of the best ways to increase participation in 401(k)s and similar workplace retirement savings plans. However, not all employers’ plans use it due to both administrative complexity and cost.

“The main cost is the employer match,” Stinnett said, explaining that higher rates of participation due to auto-enrollment results in more workers getting a matching contribution from their employer.

“That’s something you have to budget for as an employer,” he said. “It’s an increased cost.”

Required auto-enrollment might be on its way

There’s a chance that Congress could begin requiring many employers to auto-enroll as part of a broader effort to improve the U.S. retirement system. The House passed a bipartisan bill in March known as Secure 2.0 — a nod to the original Secure Act of 2019 — that would require auto-enrollment except in existing plans, businesses with 10 or fewer employees and companies that are less than three years old.

The Senate’s version of Secure 2.0 would not mandate auto-enrollment but would provide incentives for companies to implement the feature. It’s uncertain whether the bill will pass this year, before the next Congress is seated, although supporters are optimistic.

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