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401(k) savers commit to more

By Jennie L. Phipps · Bankrate.com
Tuesday, April 1, 2014
Posted: 3 pm ET

More men than women are saving a minimum of 10 percent in their 401(k) retirement accounts, according to an analysis of the accounts of about 4 million employees of companies for which Wells Fargo provides 401(k) plans.

While 43 percent of men hit the recommended 10 percent target -- including employer contributions -- only 39 percent of women do.

"This is the first time we've sliced the data by gender, and I found the results encouraging," says Joe Ready, director of Wells Fargo Institutional Retirement and Trust. "The savings rates among men and women are very close."

About 49 percent of men and 43 percent of women choose to enroll in workplace 401(k) plans, with the women being slightly more diversified in their investment choices than men. About 70 percent of women met the Wells Fargo-suggested minimum standard for diversification -- a minimum of two equity funds, a fixed-income fund and less than 20 percent in employer stock. About 67 percent of men met that standard.

The past couple of years were very good years for 401(k) savers. Average balances rose 19 percent in 2012 and 35 percent in 2013, thanks in large part to stock market gains.

Unfortunately, those attractive balances led an increasing number of people to take out loans from their 401(k)s. Some 20 percent of participants now have an outstanding 401(k) loan, up from 19 percent two years ago, and 26 percent cashed out their 401(k)s last year when they left the sponsoring companies.

Roth 401(k)s are increasing in popularity, with usage climbing from 8.6 percent of participants two years ago to 10.4 percent in 2013. Millennial employees -- those born between 1981 and 1996 -- are the biggest users of Roth 401(k)s, with 15.3 percent of millennials choosing a Roth in 2013, up 2.4 percentage points from 2012.

Roths allow savers to make after-tax contributions that grow tax-free, and savers can withdraw all their money tax-free in retirement. Ready, whose 25-year-old son is also employed in a financial services business, says he believes millennials understand better than older generations that their etirement planning relies on dedicated savings. "Near retirees and some of those living in retirement now saw 401(k)s as a supplemental benefit. But millennials understand that it is their primary benefit. They know that they own their own retirement and their comfort and security is going to be heavily related to their ability to save," Ready says.

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