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Searching for CulpritsEmail Marketing Business Opportunity - Helen BairstowGender is alive & well -- Part 2The Easiest way to do a Client NewsletterWhy Warren Buffett won't buy a NewspaperTax Expenditures & IGR No. 3A How To Book Of Self Managed Super Funds
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Gender is alive & well -- Part 2

Click here to buy - A How To Book of SMSF's by Tony Negline
Lester Wills

I am continuing to look at the Gender Gap in relation to retirement savings, as evidenced by a recent report from the ING Institute for Retirement Research entitled: "GENDER GAP: Women & Retirement...all is not equal".

ING found, like many before them (including me with my research both for my Doctorate and with IFSA), women, often with lower salaries to begin with, tend to invest a lower percentage of their pay in their retirement plans. As a result, they have significantly lower account balances. If that was not bad enough, in the US where retirement saving is voluntary, women tend to wait longer to enroll in a retirement plan than do men. Like in other countries (such as in Australia) women are more likely to have employment gaps than are men due to caregiver responsibilities, be it for children or other family members, which can result in lower lifetime wages, and a lower base to calculate any benefit.

What this all means is that women are more likely to report no retirement savings at all than are men (25% against 18% in the US). The income gap may explain this dynamic, but it is not that simple, as when household income is controlled, both women and men are equally likely to have at least some retirement savings.

I have commented on previous research that has shown the conservative approach taken by many women when investing. The ING report notes the same thing when it comments that women tend to be more conservative than men when investing for their retirement. Indeed it found that while the relationship between time horizon (or number of years until the (retirement) goal ) and appropriate investment risk is always a key consideration, ultra-conservative Stable Value investments remain the most "popular" for investors of all age cohorts, and even more so for women than for men. In general, a greater percentage of women than men invest in the more conservative asset classes.

However, when analyzing the findings, they note that only when the risk/reward spectrum begins to approach equity investments do men edge ahead of women in terms of investment allocation. But, as we all know, in the context of today's economic environment, however, the long-term effects of more conservative (or aggressive) investment activity on retirement balance remain to be seen.

What the ING report discovered was that while the overall pattern or spread across asset classes is similar for women and men, i.e. greater allocations to Large Cap U.S. Equities and Stable Value, low Self-Directed allocations, women consistently show higher allocations than men to the asset classes at the conservative end of the risk reward spectrum. This was in contrast to typical allocations for men which were more focused on the riskier asset classes.

They also found that women are more likely to "leave it to the professionals," with some 43% choosing a lifestyle of pre-mixed asset allocation retirement investment, e.g. Balanced or Lifestyle/cycle approach. On piece of potentially good news is that women tend to be less active investors, which could be a long-term benefit as "Stay and hold" has long been the mantra with numerous studies indicating that long-term investors fare better than those who attempt to "time markets".

In terms of retirement confidence and expectations, a recent Consumer Affairs.com report noted that "Women Fear Retirement More than Men - for Good Reason". ING used recent statistics from the Employee benefits Institute to back this up noting that, In keeping with identified retirement investment behavior gaps, women are less optimistic about retirement than are men. They showed the following results from the 2008 Retirement Confidence Survey

All Workers

Men

Women

Will have enough money to live comfortably throughout retirement years:

18%

23%

14%

Will have enough money for basic expenses during retirement:

34%

40%

28%

Doing a good job of preparing financially for retirement:

23%

28%

19%

Will have enough money for retirement medical expenses:

18%

22%

19%

Will have enough money to pay for long-term care in retirement:

13%

16%

11%

More next time.


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