Women and Men Differ on Retirement Plan Investments

Males tend to select higher-risk funds; females more often favor target-date approaches

By Stephen Miller Feb 25, 2011

Female participants in 401(k)-type retirement plans are placing an increasing percentage of their retirement savings into target-date funds that decrease the risk from a stock market downturn by shifting from stocks to bonds as employees near retirement, according to U.S. data from financial services firm MassMutual.

Stocks have a higher potential than bonds for long-term growth, but stocks are more volatile and face a higher risk of steep declines over shorter time periods. The nearer participants are to retiring, the less time they have for their portfolios to recover after a stock market selloff.

MassMutual's data shows that among female investors, average balances in target-date funds are approximately double those of all-stock funds. Among men, the split is roughly even between target-date and all-stock fund options. The firm's Retirement Plan Participant Survey of 1,517 U.S. participants was conducted from Nov. 15, 2010, through Jan. 15, 2011.

Which is the better strategy? While those with a higher degree of stock funds would come out ahead should the market maintain a sustained upward course (a bull market) into their retirement years, they take on the risk of suffering a substantial loss if the market falls into "bear" territory just as they begin taking retirement distributions. In general, investment advisors recommend increasing bond holdings as participants near retirement, whether this is done automatically through a target-date fund or individually by shifting from stock to bond fund holdings that are available through the retirement plan.

Mars and Venus

Possible explanations for distinctions in how men and women invest, according to MassMutual's analysis, are that women recognize the need for better asset diversification while, historically, men have demonstrated more aggressive investment behavior.

"MassMutual’s data supports the conventional wisdom that men prefer risk-based investment selections and exhibit a preference for having more control over their investments" than women, according to the firm's analysts.

That insight could prove helpful when tailoring investment education materials for plan participants. The need for asset diversification and risk-management over time should be stressed even for those who do not select a target-date fund strategy.


Investor education should stress asset diversification
and risk-management over time.


Among other gender differences, the survey found that:

• 53.1 percent of female participants said they prefer to spend as little time as possible on making investment decisions vs. 35.1 percent for men.

• 25.9 percent of women said they were confident in making their own investment decisions vs. 44.1 percent for men.

Also of note, retirement plan balances for women continue to trail men by approximately 40 percent, and their deferral percentages continue to trail those of men by 0.5 percentage point.

Signs of Recovery

On a positive note, for the plans it manages MassMutual found that the percentage of participants who stopped or decreased their salary deferrals during the fourth quarter of 2010 was just 3.8 percent—its lowest level since the stock market plunge of 2008-09. Participant loans, hardship withdrawals and call center activities declined slightly as well.

In addition, participant visits to self-service education modules were up 21 percent during 2010.

“These statistics support the fact that participants are taking more interest in managing their retirement accounts and are taking advantage of the education and saving tools available to them online,” said Elaine Sarsynski, executive vice president of MassMutual’s retirement services division. “The decreased participant activities and increased educational usage are also indicative of overall improved confidence in the economy and individual employment outlook,” she added.

The average participant balance in retirement plans administered by MassMutual at the end of 2010 exceeded the average balance from year-end 2007 when the market decline began. MassMutual’s data shows the highest percentage growth in average account balances during 2010 was experienced by participants in their forties (10.4 percent) and fifties (9.8 percent).

Among all participants, retirement assets invested in stable-value bond funds (24.9 percent) as a percentage of total assets were at their lowest level since the start of the 2008-09 recession, demonstrating increased participant confidence in equity markets and increased popularity of target-date and other mixed stock/bond investment options.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related Articles:

Study Finds Challenging Retirement Realities for Women, SHRM Online Benefits Discipline, May 2012

Longevity and Retirement: Women Need to Save More than Men, SHRM Online Benefits Discipline, December 2010

On the 401(k) Menu—Do More Funds Help Participants Diversify?, SHRM Online Benefits Discipline, re-reviewed November 2010

Target-Date Funds Bounce Back in Retirement Plans, SHRM Online Benefits Discipline, March 2010

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