Retirement Savings by Gender

When it comes to retirement savings, a significant gender gap persists.  Women, especially those between 55 and 66 years old, often have less saved up than men. About 50% of these women have no personal retirement savings at all, while this is true for 47% of men in the same age group. Furthermore, women usually save a smaller portion of their salaries for retirement — 6.2% on average, compared to men's 6.6%.

This gap in savings can be traced back to issues like the gender pay gap, as women often earn less than men, despite The Equal Pay Act of 1963 prohibiting employers from paying different wages to men and women performing the same job. As a result, women may need to work longer before they can retire. Plus, women tend to live longer than men, which means they really need to save more to support themselves in later years.

Retirement Savings: Men vs. Women

Federal data shows that just 22% of women have $100,000 or more saved for retirement, while 30% of men do. A major factor behind this gap is the gender pay disparity: on average, women earn 84 cents for every dollar that men earn, a ratio that has remained unchanged for almost twenty years.

Another study conducted by the Transamerica Center for Retirement Studies estimates that the median retirement savings for women is $43,000, less than half of men’s ($91,000). Men are much more likely than women to have $250,000 or more in retirement savings—32% compared to 21%. The study also found that 25% of women have saved less than $10,000, or nothing at all, compared to 16% of men.

The below chart shows the difference between the median retirement savings of men and women by generation:

Why a Retirement Savings Gender Gap Exists

There are a number of reasons why women have historically socked away less for retirement. One big driving force behind the savings disparity is the gender wage gap. In the U.S., on average, women working full-time throughout the year earn about 84 cents for every dollar earned by men, leading to an annual wage gap of $10,000. This gap widens for women of color and women with disabilities, who earn even less compared to their male counterparts.

Lower earnings result in reduced savings for retirement. Women often experience employment breaks due to maternity leave or caring for family members, which affects their Social Security benefits and contributes to a smaller net worth. A woman's net worth is an average of $5,541, significantly less than a man's average net worth of $12,188.

For example, in 2023, the average monthly Social Security benefit for retirees, disabled workers, and aged widows/widowers was approximately $1,788, totaling around $21,455 annually. Comparatively, in 2021, men received an average monthly Social Security payment of $1,838, while women received $1,484.

Here are some other likely reasons the retirement savings gender gap exists:

• Women often prioritize different financial goals than men, such as emergency funds, debt repayment, and child support, impacting their capacity to save for retirement.
• Women's access to employer-sponsored retirement plans is generally lower, especially for part-time workers, which disproportionately affects women. This leads to fewer women having the opportunity to contribute to 401(k)s or similar plans.
• Many women are forced to withdraw from their retirement savings prematurely. This reduces the potential for long-term growth of retirement funds.
• Women often handle unpaid duties, including childcare and elder care, resulting in career pauses during their prime income-producing years.
  

Another reason why the retirement savings gap has persisted is a lack of financial literacy. Knowledge is power, and never has that been truer than when it comes to retirement savings.

Women's financial literacy, on average, is lower than men's in the United States. The gap is even more pronounced among underrepresented minority women, who scored lower in financial literacy compared to their white peers, with minority women answering 38% of the questions correctly versus 54% for white women.

Several factors contribute to the lower levels of financial literacy among women. These include discomfort in discussing financial matters and a lack of knowledge about where to seek reliable financial information.

How to Narrow the Gender Retirement Savings Gap

To help close the gap in retirement savings, it all starts with learning about money and improving financial literacy. Knowing how and why to save is really important. The sooner you start learning about saving for retirement, the better. It doesn’t matter how old you are. There are lots of helpful tips and information available to help you start saving or to keep your savings growing.

For those needing time off for family reasons or working part-time without access to savings plans, policy changes could make a significant difference. Introducing a paid Family and Medical Leave Act (FMLA) at the federal level could be one such change. While the FMLA currently offers 12 weeks of unpaid leave, only 13 states and Washington D.C. have enacted mandatory paid family leave systems. New Hampshire and Vermont have implemented optional paid family and medical leave insurance programs. Additionally, six states (Alabama, Arkansas, Florida, Tennessee, Texas and Virginia) allow insurers to offer family leave insurance policies to employers.

And though the wage gap has narrowed, it will likely require some major policy changes to really move that needle. Iceland serves as a prime example, having implemented a law that mandates companies with 25 or more employees to report that they provide equal pay for men and women. Failure to comply results in daily fines.

In the U.S., President Joe Biden outlined an ambitious plan to tackle some of the financial disparities between men and women, starting with the creation of the White House Council on Gender Equality.

The Bottom Line

It’s a vicious cycle. Though the wage gap is narrowing, as noted above, women still only earn about 84 cents for every dollar a man earns. Lower wages translates to lower net worth and savings, which impacts how much money will be available in retirement.

Closing the gender wage gap and implementing policy changes could help bolster retirement savings for all people in the U.S. efforts to enhance financial literacy, alongside meaningful policy reforms, can also significantly contribute to equalizing retirement savings opportunities.