Women & investing: Key considerations for plan sponsors & advisors

Plan advisors and sponsors have a unique opportunity to support the women participating in employer-sponsored retirement plans — and that’s important because it’s long been recognized that men and women tend to approach investing quite differently.

It stands to reason that women’s financial planning and decision-making would differ, on the whole, from men’s investing behaviors. After all, men and women often face different circumstances and challenges to saving for retirement:

• In 2021, median earnings for U.S. women were 83.1% of the median for men¹
• Women are more likely to pause careers, work fewer hours, or make other earning sacrifices to make time for family caretaking
• In 2020, life expectancy at birth in the U.S. was 79.9 years for women, 5.7 years longer than men’s average life expectancy²

It would be disingenuous to suggest all women investors are alike, but considering these factors, it makes sense if women take a more cautious, risk-averse approach to investing. And since women make up 47% of the workforce, it’s important for advisors and plan sponsors to give their needs the same consideration as their male counterparts.³

Let’s take a look at the ways employers and plan advisors can help encourage women plan participants to engage with their retirement planning resources and investments by addressing differences in confidence, risk tolerance, and financial priorities.

Does lower confidence mean worse outcomes?

Aggressive and overconfident investing doesn’t necessarily lead to better long-term investment outcomes. If women plan participants lack confidence, they may make up for it in other qualities, like a willingness to stick with a strategy over a longer term, or a desire to balance and diversify investments.

There are potential benefits that can come with these qualities. Sticking with an investment over a longer period not only tends to smooth out market ups and downs; it can also add up to fewer transaction fees over time. The same can be said for balanced, diversified portfolios: when volatility rears its head, a portfolio crafted for balance can help an investor (of any gender) weather rough seas.

Plan sponsors and advisors can help encourage plan participants to more confidently invest by clarifying differences between investment options. Walk investors through the processes involved in rebalancing a portfolio, so they know exactly where to start. Make sure they understand the tools for accessing their portfolios and making changes when the need arises — and make those tools easy to use.

Does risk aversion lead to missed opportunity?

It’s important to consider risk-aversion in the context of investors’ lives. There’s a long-held assumption that women are more risk-averse than men, but think about it — are women more risk-averse in general, or do they already face higher risks in other areas of life, and might they be making adjustments in their investing approach to accommodate other risks?

Lower earnings result in lower Social Security benefit payments. Longer life expectancies mean more retirement years to save for. Years in and out of the workforce can add up to long periods without income to invest. All together, it’s easy to understand that a potential loss would take a bigger bite out of a woman’s retirement income. In fact, 58% of female non-investors say they don’t have enough money to invest, and 31% of women not currently investing say they’re afraid of losing everything.⁴

Plan sponsors and advisors can make a difference by educating all employees about risks associated with investing. Plan communications, financial education programs and one-on-one consultations can help all participants better understand upside opportunities and downside risks of different investment types.

Sponsors should also remind all participants about any matching benefits they offer—and can help illustrate how taking advantage of an employer match can make a major impact on retirement savings over time.

How can a plan help meet women’s investing priorities?

Historically, it’s generally recognized that women’s investment priorities tend to be goal-oriented, and more about creating security than maximizing opportunities. Rather than looking to accumulate wealth, women plan participants may have a keener interest in safeguarding their finances against unknown future risks.

Financial education can serve a vital role in helping women investors protect and preserve their nest eggs. Plan sponsors can do more than just offer financial education: promote the benefit and communicate its value to users. Educational programming can help investors understand when and how investment strategies may need to change with changing life circumstances. A newly married participant has different priorities than one who is newly divorced.

Advisors can make a practice of semi-annual or annual check-ins with plan participants. This creates regular opportunities to encourage participants to reassess their priorities and align their investment strategies accordingly.

Investor success can help build confidence

It’s important to acknowledge that, historically, women have not always had the same access to financial resources and decision-making. Many of the perceived differences in investing behaviors aren’t necessarily due to gender differences so much as they’re due to societal impacts that result from long-standing gender inequity.

Plan sponsors and advisors are in a great position today to help women move toward equal financial footing — which ultimately serves to benefit everyone.

SOURCES
¹U.S. Bureau of Labor Statistics, Median earnings for women in 2021 were 83.1 percent of the median for men, January 24, 2022. 
²NCHS Data Brief No.427, Mortality in the United States, 2020, December 2021.
³U.S. Bureau of Labor Statistics, Annual Household Data Averages, 11. Employed persons by detailed occupation, sex, race, and Hispanic or Latino ethnicity.
⁴BlackRock, BlackRock Global Investor Pulse: The World’s Largest Study on the Relationship Between Wealth and Well-Being, 2022

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