Women maintain 401(k)s as inflation concerns mount
Recession hasn’t affected long-term savings plansDecember 1st, 2022
In general, Spokane-area women participating in 401(k) retirement plans are either maintaining or increasing their contributions to the plans, although inflation is a major concern for many, some financial and wealth advisers here say.
The biggest 401(k) changes are triggered by either annual automatic payroll deductions or from women who are stepping up to take charge of their financial future despite an uncertain economy, they say.
Abby Butz, principal wealth adviser at the Spokane office of Minneapolis-based CliftonLarsonAllen LLP, says, “We are seeing (women) either increase their savings or at least keep it the same.”
She says her clients at CLA are behaving similarly as nationwide trends, but the reasons behind retirement contributions changes are more about an obligation to save for the future, rather than fear of economic conditions.
Paul Viren, owner of Spokane-based independent financial planning company Viren & Associates, says many of his female clients are maximizing 401(k) contributions just to meet their employer’s savings match.
The retirement plan contributions by women here follows a national trend reported by 401(k) Specialist Magazine, of Highlands Ranch, Colorado, which found in a survey of 1,100 women between 18 to 75 that 92% expect to maintain or increase retirement savings.
Despite the trend, both Viren and Butz say clients have expressed concerns about the impact inflation is having on savings goals.
Viren says, “Inflation has been the problem. I don’t see the recession impacting anybody.”
Butz agrees, and says, “The biggest concern right now in the market is certainly around inflation. If you go to the grocery store, you certainly feel it’s more expensive right now even for the basics of life.”
In situations where inflation has derailed retirement plan contributions for women, Butz advises clients to reevaluate their plans and goals temporarily to meet current financial needs.
“At the end of the day, trying to make ends meet can sometimes take precedent. And sometimes that means going into retirement savings and dialing it back for the time being,” says Butz.
Viren says the pandemic created a good time and place for increased personal financial scrutiny and some of his clients have decided to be more involved in making financial decisions for themselves.
“There’s a lot of carryover from the pandemic, which stems over into this (sense of) control,” Viren explains.
Butz says, on average, men typically categorize themselves as the higher investors with greater contribution rates for retirement goals. She adds that men seem to think they’re more prepared and ready for retirement than women are.
Viren disagrees that men are more prepared, though.
He says, “If I were to score which gender is doing a better job of planning for retirement, I’d say women do a better job for the most part. However, the responsibility generally falls to the male if there’s a partnership in place, which I think is a shame, as it should be a dual effort between two people.”
Butz says that major differences in retirement contributions occur between age groups rather than gender, with younger people tending to contribute less to their 401(k) plans, because they’re using their money for higher-priority goals.
She says her younger clients will question, “Why would I ever put thousands of dollars away into an account that I can’t touch when I’m trying to save for a house, a car payment, or have student loan payments?”
Viren contends that people in their 20s are dedicated to retirement savings, “but they have a lot of pressure because they have a lot of stuff they want to do and distractions from cryptocurrencies and everything else going on, and it can be confusing.”
He adds that contributions to retirement plans from Generation X doesn’t look as promising as it should either because people in that generation haven’t had as long to save in a 401(k) plan or lack the discipline to save that younger generations grew up with. So they are playing catch up.
“I find that generation is usually in tougher shape,” he says.
Butz says financial education is the key to helping clients understand why retirement savings goals are just as important to make as a car payment or a student loan payment.
“Our biggest piece of advice for anyone, is to get the advice and the education that’s required to make well thought out decisions,” she says. “Don’t act on emotion and fear. Look at the fact that every bear market has been followed by a resilient bull market. Know the basics of compound interest. … Make sure you’re using tools and resources you have access to.”
She says CLA ties every conversation with clients back to a financial plan, so that when clients ask for advice regarding financial concerns, they aren’t making emotional decisions.
“Regardless of what’s going on in the environment, let’s have a plan in place and know that economic cycles come and go,” she says. “You have to look at investing as a non-emotional thing. Figure out how much you’re able to put away for the year, get it on autopilot, so every month that amount is taken out of your paycheck and deposited into your account, so you don’t have to see or think about it.”