Why Women Have Less 401(k) Savings than Men on Average

There’s a gender gap in retirement savings, including 401(k) contributions. Women have significantly less money saved for retirement than men. Reforming the retirement system, scholars say, could hasten closing the gap.

Gender Gap

Most retirement saving in the United States occurs through 401(k) plans, employer-sponsored contribution plans that often include some form of employer matching contribution. Big differences in participation and savings rates directly impact the financial security of Americans when they quit working.

Retirement savings, which rely on factors such as income, differ for men and women. Women have stashed away less for their post-work years than men. Indeed, older women report a great deal of anxiety over their financial security, which they connect to their ability to remain independent.

Fewer women have any kind of retirement savings in the U.S. About 50% of women ages 55 to 66—the decade or so before full retirement age—have no retirement savings, according to an analysis of data from the U.S. Census Bureau’s Survey of Income and Program Participation. That’s compared with about 47% of men.

Among women who actually have retirement savings, fewer have saved a significant amount. Only about 22% of women have $100,000 or more in their personal retirement accounts. For men, that number is about 30%. It’s difficult to put a specific dollar figure on how much you should save for retirement, which varies case by case, but $100,000 won’t last long as a source of retirement income. Assuming that you’re pulling out $1,000 per month (at an annual interest rate of 3%), it would be gone in less than a decade.

Looking at 401(k) contributions specifically, these broad trends appear to hold true. The investment management firm Vanguard reported that in 2022, the median and average defined-contribution plan balances for men were about 44% higher than for women. Though women saved more than men at specific income levels, they tended to make less money and hold their jobs for a shorter amount of time, so their balances were lower.

Due to lack of data identifying employees as nonbinary and transgender, there isn’t hard data for retirement savings for these populations. A study had documented challenges that nonbinary workers have getting ahead at work. This situation suggests a negative effect on both access to and amount of retirement savings.

Potential Causes

Advocates for closing the retirement savings gap suggest that the dependence on defined-contribution programs, such as 401(k)s, may be part of the reason for the gap. Ultimately, however, it’s about labor market trends. The Vanguard study labeled the big factor as income disparity. Making less money means there’s less that you can save for retirement.

Still, there are other factors that matter. For example, the jobs that women hold also tend to be less likely to offer retirement programs. In addition, they spend less overall time in the workforce, reducing the amount of retirement savings and other worker benefits that they can accrue.

Do 401(k)s Help Women or Hurt Them?

About a third of American private-sector workers don’t have access to retirement plans through their employers, says a study from the Government Accountability Office (GAO), the investigative agency of the U.S. Congress. People who do have access have seen the type of plans change; since 1975, defined-contribution plans have increasingly taken the place of defined-benefit plans (also known as pensions).

The switch has both helped and hurt women. The authors of Wealth After Work: Innovative Reforms to Expand Retirement Security argue that defined-contribution plans are usually more portable. Because women don’t stay in jobs as long and have less tenure, the change doesn’t penalize them as much.

On the downside, defined-contribution plans tend to require a greater amount of active decision making. Unfortunately, women are less financially literate than men, making them more reluctant to take risks with retirement savings. Finally, defined-contribution plans are less likely to pay out stable income streams, which affects women more because they live longer.

What Happens When There’s an Age Gap Between Spouses?

Marital status also affects retirement, because couples pool their savings. A large age gap between a married couple can make retirement planning more complex. If one spouse is considerably younger, for example, they may be in their best earning years when their spouse retires. For women who might be in such a relationship, this is worth factoring into retirement considerations.

To account for this, couples should carefully time their retirement. Keep in mind that one member of the couple is likely to live a lot longer. Financial advisors suggest that couples could:

• Have the older spouse wait to tap into their Social Security benefits to let them keep vesting
• Be more aggressive with investments
• Get a permanent life insurance policy with a hefty death benefit
  

The Bottom Line

Proposals to reform the retirement system point out that the noted disparities are, in part, the result of the broader labor market. Fixing them will require systemic changes, such as a more robust social safety net.

Some advocates argue that a federal paid family and medical leave program would help. They also advocate for a Social Security caregiver credit that would allow caregiving to count toward Social Security benefits, as well as policies that would extend access to childcare and introduce a second-earner tax credit.