Are Women Standing Up to the

Transcription

1 Are Women Standing Up to the Retirement Savings Challenge? Recognizing Women s Strengths with Money Do you wonder how women are faring when it comes to saving and investing for retirement? Are you concerned that many might be ill prepared? It s time to move away from old stereotypes and myths about women and money. Help female plan participants use their natural advantages for a more successful savings outcome. The good news is that there is a lot that women are doing right when it comes to saving for retirement. As a retirement services provider, Fidelity believes providers and sponsors should work together to help empower women and showcase their inherent abilities to save more, take fewer risks, and better plan for a longer term investing horizon. While women generally earn lower salaries and live longer than men, they may experience certain life events that can interfere with their ability to save effectively. With as many as 9 out of 10 women expecting to be solely responsible for their finances at some point in their lives 1, fully understanding their unique retirement needs is important to help create the guidance tools and resources that they may need to successfully reach their retirement goals. Bringing Strengths to The Table Women bring key strengths to the financial planning table while facing unique circumstances that can create savings challenges. p.1

2 A Strong Foundation women s natural instincts to plan and budget serve them well when planning for retirement. Women Control Many Financial Household Decisions Many women are successful in saving for retirement because of the strengths they bring to the table. Women bring many skills to several aspects of their daily and financial lives: Studies show that many women are responsible for the majority of domestic financial decisions, serving as the chief financial officer of the household. 2 Women are also more comfortable discussing finances with their adult children, often acting as the go-to person for financial questions in a family. 3 Women are a formidable financial presence in this country, owning 8.3 million businesses and generating nearly $1.3 trillion in revenue. 4 They fuel the economy by making over 85% of consumer purchases and influencing over 95% of total goods and services. 5 Studies predict that women will control two-thirds of the nation s wealth by Women juggle multiple priorities with work and family, and have natural instincts for planning. They research things thoroughly and ask questions. This could be why fewer women than men regret financial decisions; 43% of women say they haven t made any financial mistakes versus 33% of men. 3 We believe that women have the potential to succeed financially when they apply the same determination and confidence that they display in other areas of their lives, and Fidelity is dedicated to helping them achieve greater retirement savings outcomes. p. 2

3 What Men Can Learn From Women When it comes to retirement saving and investing, men can, in fact, learn from women. In many cases, old stereotypes about women and money are dissolving into a clearer picture of capability and strength. Our research demonstrates that women tend to: Take a different approach to saving for retirement. Studies show that while men tend to overestimate their financial competence, women seek information and advice. 7 Women are more likely to work with a paid financial advisor than men (53% versus 44%). 8 Women tend to be planners by nature. They tend to stay the course during turbulent market times, keeping in mind their long-term goals and not trying to beat the market. 9 Overall, research indicates that women are more focused on holistic financial planning, while men tend to focus on investment returns. 8 Saving like a girl means smart and steady Old stereotypes and myths about women and Tend to save more of their income than men. money are finally dissolving into a clearer picture While women typically earn 10 two-thirds of what men of capability and strength. do, and their retirement balances are smaller on average ($63,700 versus $95,800 for men), 9 when adjusted for their compensation differences, women actually save more of their income. Total adjusted employee deferral levels for women are 8.3% versus 7.9% for men. 9, 10 This, combined with the average employer match of 4.4% gives women a total savings rate of 12.7%. 9 p.3

4 Taking on less risk. Women hold more balanced portfolios than men, which is beneficial during times of extreme market volatility (with only 8.1% of women holding 100% of their assets in equities versus 11% of men). 9 Women also have higher allocations in blended assets with 27% of their portfolio invested in blended versus 22% for men. 9 Fidelity analysis reveals that women are more likely to be 100% invested in an age-based target date fund, with 34% of women versus 28% of men invested as such. 9 Fidelity data also indicates that this balanced approach to investing actually helps their bottom line. Over the prior 10-year period, women and men have earned approximately the same rates of return, while females took on slightly less risk. The 10-year median annual personal rate of return for women was 7.3% versus 7.4% for men. 9 For most investors the goal is to achieve strong returns while minimizing the risk they incur and women are clearly utilizing this strategy. A Women s Approach: They have less extreme portfolios than men... and are less likely to hold 100% in stock Women are more likely to be 100% invested in a Target Date Fund Adjusted 10 for income differences, women save more of their income than men Women Men Women Men Women Men 8.1% 11% 34% 28% 8.3% 7.9% Source: Fidelity analysis of 20,600 corporate DC plans (including advisor-sold DC) and 12.3M participants as of 03/31/2013. This data is not adjusted for age or compensation distribution differences. p. 4

5 Although women have achieved roughly the same returns as men, when asked in a recent survey more men reported that their investments fared much better than most other people during the financial crisis. Where Women Still Need Help: Confidence It is estimated that women control 51% of wealth in the U.S. today, and are projected to control two-thirds by Given this shift, it s crucial that women feel empowered and confident when it comes to making investing decisions. EBRI has reported that men are significantly more likely than women to feel very confident about having enough money to live comfortably throughout their retirement years and having enough money to take care of basic expenses. At the beginning of the financial crisis in 2008, 7 out of 10 (71%) women felt scared or confused where only 58% of men had the same feelings. Now, 5 years later after the crisis the good news is that more women feel confident, but the number of men who are confident (65%) still outweighs the percentage of women (57%) who feel confident and prepared. 11 As Plan Sponsors and providers the best thing we can do for women is to reassure them that they are making the right decisions, that they are capable of achieving investment success, and that there are numerous guidance opportunities to take advantage of when needed. the percentage of women (57%) WHO feel confident and prepared 29 % % 2013 p.5

6 Key Takeaways for Employers Many women are taking the right steps to prepare for retirement such as utilizing age-based strategies or managed accounts, asking for help, staying the course, and knowing their limitations all attributes that should be applauded and encouraged. Outlined below are steps you can take to help female plan participants improve their retirement outcomes. These steps while geared towards women, will resonate with all employees: ^ evaluate How the Women in Your Plan Are Faring Understanding how the women in your workforce are preparing for retirement is critical. Knowing where they stand can help to determine where to focus your efforts. Key areas to look at are: Participation by age Deferral rates by age Asset allocation Loan and withdrawal usage ^ Get Personal Fidelity research indicates that while women use online tools and resources, they prefer to learn about retirement and investing by making human connections and through personal interactions, either individually or in small groups. They also tend to trust people more when they can see them or speak to them directly. Employers may want to consider offering: Direct interactions with investment professionals Small group opportunities such as workshops targeting this audience (e.g., Invest Your Lunch Hour or Investing After Hours events) Managed accounts offer active, ongoing professional management based on age, risk profile, and overall financial situation Meeting space for an in-house women s investment club to help women empower each other p. 6

7 Your support and advocacy for retirement planning education in the workplace for women can help them take better control of their financial future. ^ Make It Automatic Plan design features such as Auto Enrollment and Automatic Increase with a target date default investment option have solid research that backs up the potential benefits for all participants. Many women can benefit from investment options such as target date funds or managed accounts that rebalance as their age and/or risk tolerance changes. Women have a lot to balance in life and having a professional rebalance their retirement assets is one way to lighten the load. In addition, saving early in life is of crucial importance, especially for women who tend to face gaps in employment (e.g., caring for children or aging parents). Going automatic gives them the boost they need to start saving for retirement and when paired with targeted communications that also acknowledge potential employment gaps, can set them on the right path to help meet their retirement goals. If you haven t already implemented auto features, consider doing so as they can help women s (and men s) retirement income prospects. ^ We Need to Talk Be proactive in engaging women on retirement saving and start useful conversations. Target educational pieces for your women participants and the life stages they are in that speak directly to their interests in investing and long-term planning. Be sure to take advantage of Fidelity resources and programs, including the Women s Online Workshop which speaks to setting goals and saving based on specific life stages and events. As an employer, it s important to acknowledge the needs (and the strengths) of women as an important employee segment, and recognize new truths. New data and new ways of thinking demonstrate that saving like a girl means smart and steady. As a plan sponsor, your compensation and benefits programs are designed to attract and retain skilled workers, and women are key to your organization s success. Your support and advocacy for retirement planning education in the workplace for women can help them take better control of their financial future. p.7

8 Be sure to take advantage of Fidelity resources and programs, including THE Women s Online Workshop. Here are some helpful resources: Cost of Staying Home: Eight Habits of Successful Family Communications: Budgeting for a Baby: Suddenly Single? How to Protect Your Finances: Raising a Saver: 1 Ten Essential Facts About Women, Investment News, The Working Mother and Chase Slate SM Life of a Working Mother: Career, Family and Finances Survey, The Fidelity Personal Economy Intra-Family Finance Generational study was conducted online among U.S. parents and their adult children by GfK Public Affairs and Corporate Communication using GfK s KnowledgePanel during the period of July 24 August 29, State of Women-Owned Businesses Report, Fabry, Susan, Women Dominate the Global Market Place; Here Are 5 Keys to Reaching Them, Fast Company, The Female Economy, Harvard Business Review, Sept Spectrem Group, Wealthy Women Investors, Fidelity Investments, Millionaire Outlook: Women & Wealth November Fidelity Investments, based on Fidelity analysis of 20,600 corporate DC plans (including advisor-sold DC) and 12.3M participants as of 03/31/ While females had lower unadjusted Employee Deferral Rates than men (7.8% vs. 8.2%), females had higher Employee Deferral Rates across every compensation cohort, meaning the distribution of compensations (i.e., females have lower compensations than males) drove most of this difference. The overall distribution of compensations for males and females were combined to create the adjusted Deferral Rates quoted. 11 The Fidelity Five Years Later study was conducted online among 1,154 adult investors by GfK Public Affairs and Corporate Communication using GfK s KnowledgePanel during the period of February 12 25, For plan sponsor and institutional use only. Not for use with plan participants. Diversification/asset allocation does not ensure a profit or guarantee against loss. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Fidelity does not provide legal or tax advice and the information provided above is general in nature and should not be considered legal or tax advice. Consult with an attorney or tax professional regarding your specific legal or tax situation. Guidance provided by Fidelity is educational in nature, is not individualized, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI Fidelity Investments Institutional Services Company, Inc. 500 Salem Street, Smithfield, RI FMR LLC. All rights reserved