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.
- A Roth individual retirement account (Roth IRA) offers tax-free growth and tax-free withdrawals in retirement, and there are no required minimum distributions (RMDs) during the account owner’s lifetime.
- A nearly equal share of women and men have IRAs, but men have a substantial lead when it comes to account balances.
- The disparity between the IRA balances of men and women is rooted in the gender pay gap, which makes it harder for women to save money for retirement.
- Women generally live longer than men and need to save more for a longer retirement.
Average Retirement Savings by Gender
Women have stashed away an average of $57,000 for retirement—less than half of the $118,000 that men have saved on average, according to financial literacy site Annuity.org. And while 35% of men have saved at least $250,000, less than a quarter (24%) of women have reached that same benchmark, notes a recent annual survey from the Transamerica Center for Retirement Studies.
Percentage of women who have saved less than $10,000 or nothing at all for retirement, compared with 14% of men.
Women are less prepared financially for retirement, and they are also less confident about funding their golden years. According to the same survey noted above, only 18% of working women are “very confident” that they will be able to fully retire with a comfortable lifestyle, vs. 28% 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 2020 data (the most recent available) from the Pew Research Center, women earn 84 cents for every dollar that a man earns.
However, there is an encouraging trend: The gender pay gap has narrowed for younger women as they increase their education and break into traditionally male-dominated fields.
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 to raise a child or care for an elderly parent—risk not having the 35 years of positive earnings needed to maximize Social Security benefits. According to data from the Brookings Institution, having one child lowers a woman’s Social Security payout by 16%, and each additional child increases the gap by 2%.
And 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 the Transamerica Center for Retirement Studies, which doesn’t include gender differences in its report, estimated median retirement savings differ greatly by ethnicity. Asian American/Pacific Islander ($123,000) and White workers ($119,000) have saved significantly more than Black ($39,000) and Hispanic/Latinx workers ($50,000).
The same study also found that:
- White (35%) and Asian American/Pacific Islander (AAPI) workers (33%) are much more likely to have saved at least $250,000 for retirement, compared with Black (19%) and Hispanic/Latinx workers (18%).
- Hispanic/Latinx (34%) and Black workers (32%) are less likely to have invested in an IRA, compared with White (43%) and AAPI workers (50%).
- Hispanic/Latinx workers (33%) were more likely than Black (28%), White (22%), and AAPI workers (19%) to have dipped into savings due to the COVID-19 pandemic.
- AAPI (60%) and Black workers (58%) are more likely to expect to rely on self-funded savings such as 401(k)s and IRAs as their primary source of retirement income, compared with White (53%) and Hispanic/Latinx workers (48%).
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 $43,000, compared with $99,000 for non-LGBTQ+ workers. Additionally:
- 83% of non-LGBTQ+ workers are saving for retirement through employer-sponsored plans like 401(k)s, 403(b)s, and similar plans, and/or outside the workplace, which is significantly more than the 73% of LGBTQ+ workers doing so.
- 30% of LGBTQ+ workers are saving outside of work (e.g., in a traditional or Roth IRA, mutual fund, or bank account), vs. 42% of non-LGBTQ+ workers.
- LGBTQ+ workers (31%) were more likely than their non-LGBTQ+ (24%) peers to have dipped into their savings due to the COVID-19 pandemic.
- Non-LGBTQ+ workers (54%) are more likely than LGBTQ+ workers (45%) 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.
- LGBTQ+ workers (63%) are less confident in their ability to retire comfortably than non-LGBTQ+ workers (74%).
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.
- Learn if you are eligible for the Saver’s Credit, an Internal Revenue Service (IRS) tax credit for saving for retirement.
- 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.
What is the gender wage gap?
The gender wage gap—also known as the gender pay gap—refers to the income disparity between women and men for doing the same work. While the gap has narrowed since the passage of the Equal Pay Act in 1963, women still make just 84 cents for every dollar that a man makes doing the same job.
What is the Roth individual retirement account (Roth IRA) contribution limit?
For tax years 2021 and 2022, you can contribute up to $6,000 to your individual retirement accounts (IRAs). If you’re age 50 or older, you can add a $1,000 catch-up contribution, bringing the total to $7,000.
Do women have less in retirement savings than men?
Yes. Women have substantially smaller retirement savings overall: an average of $57,000 saved vs. $118,000 for men. The disparity can be traced to the gender wage gap, which makes it harder for women to set aside money for retirement. Women also are more likely to miss work or leave the workforce early to manage parenting and caregiving responsibilities, which can reduce their earnings, ability to save, and lifetime Social Security benefits.
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 often fall on women, leading to long career interruptions and early departures from the workforce.