retirement savings  |  APRIL 8, 2022

Important Things to Know About the Savings Gender Gap

Women face unique challenges saving for—and supporting themselves through—retirement.


Key Insights

  • Women earn less than men (on average) and end up saving less for retirement as a result.

  • Women generally live longer than men, making it even more important for them to have enough set aside for a longer retirement.

  • There are several ways to shrink this gap, including budgeting, negotiating, financial education, stepping up savings, and preparing for life’s changes.

Judith Ward, CFP®

Thought Leadership Director

The wage and lifetime income gaps between men and women present many challenges for women preparing for retirement. “While there is progress among women saving for retirement, the gap between men’s and women’s retirement savings persists,” says Judith Ward, CFP®, a thought leadership director with T. Rowe Price. “It’s a likely follow-through resulting from lower lifetime earnings.” As a result, women are contributing less to their 401(k)s than their male counterparts at a median of: 8% versus 10% for Gen X, and 6% versus 8% for millennials, respectively.* What’s more, women typically live longer than men and will therefore need more in savings to support themselves throughout their retirements.

Generally, investors increase their savings rate as they get older, however, savings behaviors among younger generations of women are concerning. In a nutshell, lower salaries coupled with lower contribution rates have resulted in lower retirement account balances. (See “The Gender Gap in Income and Retirement Savings.”)   

The Gender Gap in Income and Retirement Savings

The gender pay gap and disparity in retirement savings has persisted over the last three years of our studies.

The gender pay gap and disparity in retirement savings has persisted over the last three years of our studies.

Source: 2019–2021 T. Rowe Price Retirement Savings and Spending studies. Income is based on the previous year, while 401(k) balance is based on the current year the study was fielded.

1. Know your worth and negotiate accordingly.

Women need to value themselves and their work potential by understanding their worth, negotiating for competitive salaries, and remaining aware of the longer-term effects of underemployment. “Your starting salary with an employer is typically the anchor to which future raises, bonuses, and promotions will be connected,” says Ward. Failing to negotiate (or know what the industry pays) may result in a significant loss of potential wages during your career.

2. Buckle down and budget.

A budget, or spending plan, can provide a framework to track your expenses and accommodate your savings goals. Once you understand how and where you’re spending money, you can find opportunities to reduce expenses and increase your retirement savings.

3. Ditch the debt.

There are many reasons that women are contributing less to their 401(k)s than their male counterparts, but our research has shown that debt plays a role. Debt balances may affect women more harshly than men because their lower incomes may lead to higher debt-to-income ratios. If debt is getting in the way of you being able to save, target the real culprit first: high-interest credit card debt. Once that debt is paid off, then readdress your savings goals. Of course, keep making regular payments on lower-interest debt such as student loans or your mortgage.

4. Have money on the side.

Start an emergency fund with $1,000, then work to increase it to an amount that can cover three to six months’ worth of expenses. You can use this for an unexpected bill or to get through an uncertain period without having to tap credit cards or borrow from your retirement savings.

5. Step up your savings rate.

If you have access to a workplace retirement plan, aim to save at least 15% of your salary, including any employer match. If 15% is too challenging, start at 6% and increase your contribution by two percentage points each year. Plans that offer automatic annual increases can make upping your contribution each year simple. “At a minimum, take advantage of any available company match,” says Ward. If you don’t have a workplace retirement plan, consider investing in a Traditional or Roth individual retirement account (IRA).

6. Prepare for life changes.

For many couples, starting a family requires sacrifice and the need for flexibility. Women have typically been more likely to take time out of the workforce or alter their careers—though there’s evidence this may be becoming more of a shared responsibility. If leaving the workforce, you can keep a foot in the door with part-time, contractual, or consulting work. Continue to network and keep your skills sharp. Keep up with retirement savings, and consider a spousal IRA if you are relying on your partner’s income for the household.

7. Get comfortable with money matters.

Our survey found that within the first five to 10 years of retirement, about one-third of women (32.6%) were either widowed or divorced compared with 6.8% of men. Prepare for these possibilities by educating yourself, so you can be more knowledgeable about your finances and investments. “Tune in to podcasts, find a favorite blogger, choose a book on finances, or use an online retirement tool to get started,” suggests Ward.

Ultimately, women need to take their own needs into consideration when planning for retirement. Taking steps to improve your finances, and being intentional about earnings and savings, can position you for a more secure retirement.

*Source: 2021 T. Rowe Price Retirement Savings and Spending study.

Important Information

This material has been prepared for general and educational purposes only. This material does not provide recommendations concerning investments, investment strategies, or account types. It is not individualized to the needs of any specific investor and is not intended to suggest that any particular investment action is appropriate for you, nor is it intended to serve as the primary basis for investment decision-making. Any tax-related discussion contained in this material, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or tax professional regarding any legal or tax issues raised in this material.

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