Men are less likely than women to participate in 401(k) plans unless they auto-enroll

A new study suggests that some men may need a bigger boost than women when it comes to participating in retirement savings plans at work.

Auto-enrollment 401(k) plans require employees to opt out if they don’t want to participate, but Vanguard reports that 93% of both men and women remain signed up. However, in schemes where membership is voluntary (workers must actively participate), participation rates lag behind women at all income levels.

The biggest difference is in the $50,000 to $74,999 income range, with 81% of women participating compared to 67% of men.

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“Women’s savings behavior is comparable to, or in some cases better than, men’s,” says Dave Stinnett, head of strategic retirement consulting at Vanguard. [in account balances] Because men earn more

According to Vanguard research, the average 401(k) balance for men in 2021 will be $93,512, compared to $70,037 for women.

Part of the reason is that men have a higher average deferral rate (percentage of income that goes into planning) at 7.5%. 7% for women.

Men also earn more, so higher deferral rates attract more cash. According to recent data from the U.S. Bureau of Labor Statistics, a woman’s earnings for every dollar she earns for a man who works full-time is her 83.4 cents.

According to Vanguard research, auto-enrollment plans leave women at a slightly higher rate than men in the income range of less than $150,000, but the difference is more than 3% across all income brackets. there is no.

But overall, female and male participation rates (68% and 65%, respectively) for voluntary enrollment plans are much lower than 93% for automatic enrollment plans.

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

“The main cost is employer matching,” Stinnett said, explaining that increased participation rates through auto-registration will mean more workers will receive matching contributions from their employers.

“This is something you have to budget for as an employer,” he said. “It’s an increase in cost.”

As part of a broader effort to improve the US retirement system, Congress may begin requiring automatic enrollment for many employers. The House of Representatives he passed a bipartisan bill known as Secure 2.0 in March. This agrees with the original Secure Act of 2019, which requires automatic registration except for existing plans, businesses with 10 or fewer employees her, and businesses less than 3 years her.

The Senate version of Secure 2.0 does not mandate auto-enrollment, but does provide incentives for businesses to implement this feature. Supporters are optimistic, but it’s unclear if the bill will pass this year before the next parliamentary session.