Ways to help women overcome the retirement savings gap and boost confidence

The wage and lifetime income gaps between men and women present many challenges for women preparing for retirement. In our 2024 T. Rowe Price Retirement Savings and Spending Study, which surveys a nationally representative group of 401(k) plan participants, focused on the gender gap in retirement savings—and the disparities are striking and persistent.

Our analysis showed that women were contributing less annually to their workplace 401(k) plan and had significantly lower retirement account balances (Figure 1).

Therefore, it is understandable that women’s level of financial stress is higher, with 64% of women reporting high and moderate levels of stress compared with 55% of men.

The gender gap in retirement savings is a challenge for women who are preparing for retirement, and we understand that there are various social and economic factors that significantly affect women’s ability to save. In our research, we examine how traditionally lower incomes, along with factors such as participation in retirement plans, debt, and job tenure, may be contributing to the gender retirement savings gap.

Lower income means lower contributions

Although many employers have made progress in addressing the gender pay gap, national averages reflect that women typically earn less than men. In our survey of plan participants, the average income of women was 73% that of men (Figure 1).

The median contribution rate women expected to defer over the next 12 months, including both the employer and employee contribution, is 11% of their income, compared with 12% for men. (T. Rowe Price’s suggested target is 15%, including company match if available.)

"Women’s retirement security may be at risk because lower income coupled with higher levels of debt limit women’s ability to save."

The one-percentage-point difference in the contribution rate seems marginal, but when coupled with a lower income base, the long-term compounded effect can result in dramatically lower retirement account balances for women. Women’s retirement security may be at risk because lower income coupled with higher levels of debt limit women’s ability to save.

Women carry a higher debt burden

For many retirement savers, paying off debt is a high financial priority that competes with retirement saving. This is particularly true for women. Our analysis found that more women than men held debt across all categories except for home equity loans. The disparity in student loan debt, in particular, is notable. In our study, 19% of men and 26% of women reported that they had student loan debt (Figure 2).

Digging deeper, we find that, of those with student loan debt, the average amount for women was about $33,700 and about $23,400 for men. Having student loan payments may hamper one’s ability to save (Figure 3).

Women’s unique challenges

Women should take their unique needs into consideration when planning for retirement, and we believe that financial wellness programs offered within retirement plans can be beneficial. They can also seek financial education and guidance from financial institutions, a financial advisor, or a financial coach.

"...the majority of women (60%) are divorced, widowed, or never married in retirement versus about one-third (35%) of men."

Helping women overcome the retirement savings gap will help them be better prepared for the challenges they may face in retirement. Statistically, women live longer than men. And our research indicates that the majority of women (60%) are divorced, widowed, or never married in retirement versus about one-third (35%) of men. Taking steps to improve individual finances and becoming comfortable with financial decisions can be empowering and could position women for a more secure retirement.

Simplify savings with these three steps

Don’t let a lack of confidence in investing stop you from getting started with saving for your future.

1. Consider target date investments.
   Many employees today may be automatically enrolled in their workplace plan in an age-based target date investment. These investments are already diversified for you, and the allocation automatically adjusts over time. If one isn’t sure how to invest, a target date investment may be a good place to start.
2. Determine your contribution rate.
   To pursue a successful retirement, generally, workers should aim to save at least 15% of their salary, including any employer contributions if available in their workplace plan. That may be a lofty goal for many retirement savers, so consider starting with the minimum needed to take full advantage of any company match, generally 6% of salary.
3. Step up savings.
   If you can’t save enough right away, plan to increase your contribution rate by one or two percentage points each year (Figure 4). Automating annual increases can make upping contributions each year simple. Our analysis indicates that to accumulate enough money to retire, one rule of thumb is to have saved 11 times your preretirement salary at age 65. Many workplace plans offer a service that will automatically escalate your contribution amount each year. Make sure to enroll. You can always opt out if you need to. Remember that you can also supplement your retirement plan savings by investing in a Traditional or Roth individual retirement account (IRA).

Make a plan: Use available tools and resources

Workplace retirement plans often provide financial tools, guidance, and services that employees can use to assess their financial situation and then create a financial plan, which can help build financial confidence. Also, anyone can increase their financial literacy by engaging with these resources that typically include budgeting apps, podcasts, books, online articles, and videos, among other content. Both formal and informal education can empower women to take charge of their financial futures. This guidance may include:

Have a spending plan. A budget, or spending plan, can provide a framework to track expenses and accommodate savings goals. Understanding how and where money is spent can help identify opportunities to reduce expenses and potentially increase retirement savings.

Focus on debt. Debt clearly plays a role in lower retirement contribution rates for women. It is important to target the elimination of high-interest debt and explore programs that assist with student loan repayment or forgiveness. To help enable and encourage young people with student debt to start saving for retirement, employers with 401(k) plans, 403(b) plans, governmental 457(b) plans, and SIMPLE IRAs may elect to update their plans so qualified student loan payment amounts would be eligible for any employer match into the employee’s retirement account.

Prepare for the unexpected. Consider starting an emergency fund with $1,000 and then work to build it to an amount that can cover three to six months’ worth of expenses. The fund can be used for an unexpected bill or to get through a period of financial uncertainty without having to tap credit cards or borrow from retirement savings. A provision of SECURE 2.0 allows employers to offer an “emergency fund” if they so choose. This will allow eligible participants to make limited contributions to an emergency savings account and have access to those funds penalty-free. Contributions would be eligible for any employer match into their retirement account as an extra incentive to save.

Keep retirement savings top of mind. Having career aspirations and work-life balance is important for many women. If changing jobs to take advantage of higher-earning opportunities or altering careers for needed flexibility, keep retirement savings on track. When changing jobs, be sure to weigh all of your options for your old 401(k) plan. You may also need to revisit your investment options and contribution rates in your new workplace plan. If leaving the workforce and relying on a partner’s income for the household, consider continuing to save in a spousal IRA. In either situation, try to keep your retirement savings intact, as cashing out your old 401(k) may have significant financial consequences.