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Men participate less in 401(k) plans than women, unless they automatically enroll

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According to new research, some men may need a bigger boost than women to participate in their workplace retirement savings plan.

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

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

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“Women’s savings behavior is equal or in some cases…better than men’s,” said Dave Stinnett, head of strategic retirement consulting at Vanguard. “It just doesn’t reflect [in account balances] because men have higher incomes.”

Men earn more and save more

The average 401(k) balance for men in 2021 was $93,512, compared to $70,037 for women, according to Vanguard research.

This is partly because men have a higher average deferral rate — the percentage of income paid into the plan — of 7.5%. For women, it’s 7%.

Men also earn more, so a higher carry generates more money. For every dollar earned by men working full time, women earn 83.4 cents, according to recent data from the US Bureau of Labor Statistics.

Both men and women benefit from automatic registration

In auto-enrollment plans, women also remain participants at a slightly higher rate than men in the income bracket below $150,000, although the difference is no more than 3 percentage points in any given income bracket. , according to Vanguard research.

Overall, however, the participation rate of women and men—68% and 65%, respectively—in voluntary enrollment schemes is much lower than the 93% rate in automatic enrollment schemes.

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

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

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

Required auto-registration may be in progress

Congress may begin requiring many employers to automatically enroll as part of a larger effort to improve the US retirement system. The House in March passed a bipartisan bill known as Secure 2.0 — a nod to the original Secure Act of 2019 — that would require automatic enrollment, except in existing plans, businesses with 10 employees or less and businesses less than three years old.

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

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