Women Are Under-Utilizing Self-Directed Brokerage Accounts

Many SDBAs also allow account holders to hire professional advisors to manage their investments, providing personalized guidance and expertise to help them achieve their financial goals.

Addressing the gender gap in SDBAs

The under-representation of women in SDBAs is part of a broader gender gap in retirement savings. Studies show that, on average, women have less saved for retirement than men. According to the Organisation for Economic Co-operation and Development, women received 26% less in retirement income than men in 2021. This disparity can be attributed to a variety of factors, including income inequality, career interruptions due to caregiving responsibilities, and a lack of access to employer-sponsored retirement plans.

Furthermore, research indicates that women tend to be more conservative investors than men, which can lead to lower returns and smaller account balances over time. This risk aversion may be preventing women from taking advantage of the wider range of investment options available through SDBAs, further contributing to the gender gap in retirement savings.

It's crucial for women to be aware of the benefits of SDBAs and consider using these accounts to optimize their retirement savings. Here are some strategies that can help women make the most of SDBAs and close the gender gap in retirement savings.

Knowledge is power, and understanding the ins and outs of SDBAs and their investment options is the first step toward making informed decisions about your retirement savings. Research different investment types, such as stocks, bonds, ETFs, and mutual funds, and familiarize yourself with the risks and potential returns associated with each. Additionally, take advantage of educational resources provided by your employer, retirement plan provider, or investment advisor to gain a deeper understanding of SDBAs and how they can benefit your retirement savings strategy.

Getting the most out of your SDBA

Before making any investments, evaluate your risk tolerance and ensure that your investment choices align with your financial goals and comfort level. There are various online tools and questionnaires available to help you gauge your risk tolerance and identify an appropriate investment strategy. You can also consult with a professional advisor to get personalized guidance based on your unique circumstances.

Diversification is a crucial aspect of any investment strategy, as it can help minimize risk and potentially increase returns over time. By maintaining a well-diversified portfolio that includes a mix of stocks, bonds, ETFs, and mutual funds, you can take advantage of the broad range of investment options available through SDBAs while mitigating the potential impact of market fluctuations on your retirement savings.

If you're unsure about managing your investments or feel overwhelmed by the decision-making process, consider hiring a professional advisor to assist with your self-directed 401(k) brokerage account. Some advisors can even manage your 401(k) SDBA account for you, doing the research, making the trades, and monitoring the account. An advisor can provide personalized guidance, help you develop a tailored investment strategy, and ensure that your portfolio aligns with your financial goals and risk tolerance. While there may be fees associated with hiring an advisor, research suggests that the benefits of professional guidance can outweigh the costs and potentially lead to higher returns on your investments.

To maximize the potential of your SDBA, it's essential to regularly review and adjust your investments as needed. This may involve rebalancing your portfolio, evaluating the performance of individual investments, or making changes to your investment strategy based on changes in your financial goals, risk tolerance, or market conditions. Regular monitoring and adjustments can help ensure that your retirement savings remain on track and aligned with your long-term objectives.

Closing the gender gap in retirement savings

In addition to utilizing SDBAs, there are several other strategies that women can employ to address the gender gap in retirement savings. Advocate for equal pay and career advancement opportunities to increase income and retirement savings potential.

It is often wise to contribute as much as possible to employer-sponsored retirement plans, especially if there are matching contributions available. Consider alternative retirement savings vehicles, such as IRAs or brokerage accounts, to supplement employer-sponsored plans. Create a comprehensive financial plan that includes short- and long-term goals, such as paying off debt, building an emergency fund, and saving for retirement. Seek professional advice from a financial advisor or planner to develop a tailored retirement savings strategy that aligns with your unique financial goals and circumstances.

The under-utilization of SBDAs by women represents a missed opportunity to optimize retirement savings and achieve financial independence. By educating themselves on SDBAs, assessing their risk tolerance, diversifying their portfolios, and considering professional guidance, women can take advantage of the benefits these accounts offer and work toward closing the gender gap in retirement savings. Additionally, implementing broader financial planning strategies and advocating for systemic changes, such as equal pay and access to employer-sponsored retirement plans, can further contribute to women's financial empowerment and long-term financial security.

Renée Pastor is founder and wealth manager at The Pastor Financial Group, a comprehensive financial planning and wealth management practice headquartered in New Orleans, Louisiana. The firm specializes in retirement planning and 401(k) management for families and individuals nationwide. To learn more, please visit thepastorgroup.com

A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out our full schedule of upcoming CE-approved virtual events.

Read more articles by Renée Pastor