Is There a Roth IRA Gender Gap?

Roth individual retirement accounts (Roth IRAs) offer several tax benefits that make them an attractive way to save for retirement. Money in the account grows tax free, and qualified withdrawals—those taken when you are at least 59½ years old and have had an IRA for at least five years—are also tax free. There are also no required minimum distributions (RMDs) during the account owner’s lifetime, and you can contribute to a Roth no matter how young or old you are—as long as you have earned income. 

Men and women are equally likely to invest in these tax-advantaged accounts; there’s no gender gap in IRA ownership. However, when comparing retirement account balances, women have saved substantially less than men—a disparity rooted in the gender pay gap and time out of the workforce for parenting and caregiving. 

Average Retirement Savings by Gender

Women have stashed away an average of $59,000 for retirement—less than half of the $89,000 that men have saved on average, according to a 2023 Bank of a America financial study. And while 35% of men have saved at least $250,000, less than a quarter (23%) of women have reached that same benchmark, as of late 2022.

Women are less prepared financially for retirement, and they are also less confident about funding their post-working years. According to a Transamerica Center for Retirement Studies survey, only 19% of working women are “very confident” they will be able to fully retire with a comfortable lifestyle, vs. 26% of men.

Two primary factors contribute to the lack of parity in retirement savings: Women earn less than men, and women are more likely to take time away from work for parenting and caregiving responsibilities. 

Although the gender pay gap has slowly narrowed since the Equal Pay Act of 1963 was signed into law, women still earn significantly less than men. According to 2022 data (the most recent available) from the Pew Research Center, women earn 82 cents for every dollar that a man earns—an 18-cent pay gap. And not much has changed in the last two decades: In 2002, women earned 80 cents for every dollar a man earned.

The wage gap is narrower for workers ages 25 to 34 than for all workers 16 and up. In 2022, women ages 25 to 34 earned an average of 92 cents for every dollar a man earned in the same group—an 8-cent pay gap.

Still, lower earnings make it more difficult for women to set money aside for retirement. That’s especially troubling because women generally live longer than men—and need to save for a longer retirement. 

Women with long career interruptions—such as raising one or more children or caring for an elderly parent—risk not having the 35 years of positive earnings needed to maximize Social Security benefits. According to data from the Social Security Administration, women's benefits are about 78% of those men receive. Having one child lowers a woman’s Social Security payout by 28%, and each additional child increases the gap by 3%.

Additionally, women who leave work to care for an elderly family member not only miss out on wages but also lose an average of $131,000 in lifetime Social Security benefits—further hurting their chances of enjoying a comfortable retirement.

Retirement and Race

Workers across ethnicities who are saving for retirement most frequently use a 401(k) or similar plan, a bank account, or an IRA. However, people of color are less likely to be on track for retirement than White workers.

According to another survey from the Transamerica Center for Retirement Studies, estimated median retirement savings differ greatly by ethnicity. Asian American/Pacific Islanders ($74,000) and White workers ($60,000) have saved significantly more than Black ($17,000) and Hispanic/Latinx workers ($29,000).

The same survey also found that:

• White (29%) and Asian American/Pacific Islander (AAPI) workers (29%) are much more likely to have saved at least $250,000 for retirement than Black (13%) and Hispanic/Latinx workers (18%).
• Hispanic/Latinx (79%) and Black workers (74%) are less likely to have participated in an employer sponsored plan, compared with White (81%) and AAPI workers (82%).
• AAPI (52%) and White workers (38%) are more likely to expect to rely on self-funded savings such as 401(k)s, IRAs, and other savings and investments as their primary source of retirement income, compared with Black (34%) and Hispanic/Latinx workers (36%).

LGBTQ+ Status and Retirement Readiness

Most workers who identify as either LGBTQ+ or non-LGBTQ+ are saving for retirement at work or on their own (e.g., using an IRA). However, of the two groups, LGBTQ+ workers have less in total household retirement savings. According to the Transamerica Center for Retirement Studies, the estimated median retirement savings for LGBTQ+ workers was $14,000, compared with $51,000 for non-LGBTQ+ workers. Additionally:

• 58% of non-LGBTQ+ workers are saving for retirement through employer-sponsored plans and/or outside the workplace, which is significantly more than the 45% of LGBTQ+ workers doing so.
• 69% of LGBTQ+ workers are participating in an employer-sponsored plan, vs. 81% of non-LGBTQ+ workers.
• Non-LGBTQ+ workers (39%) are more likely than LGBTQ+ workers (35%) to expect self-funded savings from 401(k)s, 403(b)s, IRAs, and other savings and investments to be their primary source of retirement income.
• Fewer LGBTQ+ workers (58%) have a retirement plan in place compared to non-LGBTQ+ workers (67%).

Steps to Improve Retirement Readiness

Women and people of color are less likely than their White peers to be ready for retirement due to gender and racial pay gaps as well as differences in parenting and caregiving responsibilities. Still, the Transamerica Center for Retirement Studies offers these tips for improving retirement readiness:

• Assess your current financial situation and create a budget.
• Save early and consistently for retirement.
• If your employer offers a retirement plan, participate and take full advantage of any matching contributions.
• Take advantage of the Saver’s Credit, an Internal Revenue Service (IRS) tax credit for saving for retirement, if you are eligible.
• Develop a retirement strategy and write it down.
• Avoid taking loans and early withdrawals from retirement accounts.
• If faced with parenting or caregiving responsibilities, explore options like shifting to part-time work to mitigate the impact on your long-term financial security.
• Be proactive about honing current skills, learning new ones, networking, and following employment trends.
• Be involved in your family finances and investments, including retirement accounts.
• Learn about retirement investing and strategies for drawing down savings in retirement, including the best time to start receiving Social Security benefits.
• Create a backup plan that considers divorce, loss of a partner, or loss of work before your planned retirement.
• Build up emergency savings.
• Practice self-care to safeguard your physical and mental health.
• Beware of scams.

The Bottom Line

Women are less prepared for—and less confident about—retirement than their male peers. The gender pay gap is narrowing, but it endures and still plays a significant role in women’s relative lack of financial readiness for retirement. So, too, do the parenting and caregiving responsibilities that tend to fall on women, often leading to career interruptions and early departures from the workforce.