Your 'savings mindset' can shape your financial future
Women need to play to their strengths when it comes to retirement planning
A version of this article originally appeared on MarketWatch.
There's plenty of information out there when it comes to how people are struggling to save for retirement, and not surprisingly much of it highlights all the areas that need improvement. People aren't saving enough, there's too much personal debt, juggling competing financial priorities is exhausting...the list goes on.
Of course, in any area of life, from our relationships and careers to our physical and financial health, being honest about where we are falling short is an important part of how we take steps to improve. But focusing only on what's not working can mean some of our greatest strengths get overshadowed.
This holds especially true when it comes to women and saving for retirement.
There are some hard facts that can't be ignored. Women have lower salaries compared to men, and often have reduced career earnings because many of us will leave the workforce for periods of time to start a family or take on caregiving responsibilities (or both). Women also have to plan for living longer than men. These are all factors that play into how women are saving and investing for retirement and their overall state of financial wellbeing.
In the face of challenges like this, I am not surprised that we keep seeing data showing that women lack confidence when it comes to financial decision-making and feel uncertain about their long-term financial security. In our most recent 401(k) participant survey, only 17% of women said that they were very confident in making 401(k) investing decisions on their own—half the total for men.*
However, the data also shows that women have a key strength: a savings mindset. In short, women report that they view themselves more as savers than investors, and they see themselves this way across many parts of their financial lives, including how they invest, the decisions they make about their retirement contributions and the advice they seek.
As I reviewed the data and started thinking about my own personal experience, it became obvious to me that leaning into this strength – the savings mindset – can emotionally and practically empower women to tackle their financial challenges head on. The savings mindset opens real choices for women on the path to retirement, and when paired with good information and advice, it can go a long way to building confidence about retirement.
Taking the long view
Consider how this strength can help with stress, for example. Our research found that four in ten women report feeling stressed about retirement planning overall, while more than half aren't sure what their investment picture should look like.
Enter the savings mindset. To me, a savings mindset is the ultimate long view, and this means you aren't trying to make decisions that only matter today or tomorrow. You can take the time to review your overall financial picture and see where your gaps or blind spots are, seek professional advice, and from there make a financial plan that reflects your own goals.
Nothing is more important to retirement planning than saving. What's more, in my experience, having a plan to drive your long-term savings helps enormously with the stress that women (and men) feel when it comes to retirement. So, women - double down on that strength.
Planning, choices & self-care
Why is it that planning can make a difference in our stress levels? I think it is largely because planning gives you more choices, and choices let you work towards a goal that is specific to you.
Imagine throwing a dinner party tonight, with no planning. Your menu will have limited choices. The same goes for saving for retirement – having a plan gives you more options for how you get there.
Similarly, while a well-planned dinner party will give you more choices on the menu, the ultimate experience is also dependent on the ingredients you choose. The same goes for saving for retirement.
I believe one of the most important features added to 401(k) plans in the last decade is automatic enrollment, because it's helped so many workers get going on their retirement saving by essentially completing the enrollment process and investment selection for them. This is an important feature when you consider that for most women in our study (72%), a 401(k) is their first investing experience.
But while you might start out with the right investment choices, whether you have been auto-enrolled or not, you also have to stay engaged with your plan as your life changes, because the ingredients you need for your retirement security can also change.
I was struck by the fact that our study shows that half of women (54%) – which is also double the number of men – have never changed their 401(k) investment choices since they were auto- enrolled in their plan. So, while women are approaching retirement planning with a savings mindset, they aren't consistently evaluating whether their savings are invested appropriately.
It's important not to fall into a pattern of "set and forget" when it comes to your 401(k) plan or even your brokerage account. Imagine setting up an auto-reorder on Amazon for your weekly groceries and never changing it for 40 years. That's essentially what you are doing with your retirement money if you don't check in on your investment choices periodically.
I look at reviewing my 401(k) as part of my overall self-care routine, right alongside things like developing my annual professional goals or making sure I get my yearly physical check-up. They are all key to making sure that I am on track in the areas of my life that are important to me.
Making well-informed personal choices
Today's consumers like to be informed. Almost nothing we do or buy, big or small, comes without a ranking or a review these days. It is easy to do our own background research, conduct our own mini-focus groups and find exactly what we want (or have it made), in whatever color, shape or size we desire.
It is no different with retirement planning, especially for women. Two intriguing results from our survey show that more women (75%) than men (68%) are interested in getting professional advice to develop their financial plan; likewise they are also more likely to want personalized investment advice for their 401(k) plans, (72% to 64%) specifically.
Why is this? I don't think it is merely a matter of investing complexity or aligning priorities. Our lives change dramatically over time, so it is not only prudent but also necessary for women to reassess their plans—as they grow their families, save for college tuition, or care for elderly parents.
If you haven't asked for help or you don't have a financial plan, anxiety ensues. The majority of 401(k)s these days offer professional advice through a managed account or online resources. Or, if you prefer to take the reins entirely yourself, there are many great tools available to help inform your decisions.
The most important thing is to activate your strength - your savings mindset - by getting the information and advice, and making the choices, that help you invest and manage your money effectively.