The gender gap doesn’t stop at salaries and pay—it extends to retirement savings, too.
New research from T. Rowe Price shows that women contributed less to their workplace retirement accounts and had significantly lower retirement account balances than men. The median 401(k) account balance for women was 65% lower than for men, while women faced a 43% gap in contributions compared to males. Confidence between the two saw a gap of 40%.
T. Rowe Price attributes the decrease in contributions to the continuing gender pay gap—the data reported the median income of women was two-thirds that of men. As a result, women are less likely to be prepared for a secure retirement because lower income limits their ability to save, finds the research.
“The gender income gap is contributing to a domino effect of women’s finances; lower earnings can have an effect on their current financial decisions which ultimately impacts their financial future, including retirement savings,” said Judith Ward, CFP, thought leadership director at T. Rowe Price, in a statement. “As women, it’s critical for us to be proactive when it comes to our money and to seek guidance and education that is necessary to put us on the path toward a successful financial future.”
Plan access and participation
Despite finding an income gap between women and men, T. Rowe Price research did not see a large break in retirement plan access and participation in certain industries and sectors.
According to findings, retirement plan participation appeared consistent among private sector wage and salaried workers between the ages of 21 and 64, at 52.5% for men and 51% for women.
Specifically, women and men who worked in manufacturing, transportation, communication, finance, insurance, and real estate sectors were more likely to be on par with retirement participation, even if there were less women employed in the workforce. However, women who work in wholesale, retail trade, business, and personal services industries were likelier to participate less in their retirement plans.
Women face competing inequalities
Aside from experiencing a gender pay gap, women are also likelier to carry higher debt burdens and have shorter job tenures, finds T. Rowe Price.
The analysis found women held more debt than men across all categories except for home equity loans, including credit card debt (54% vs. 56.4%), student loans (14.3% vs. 22.9%), car loans (28.3% vs. 34.3%), medical debt (14.3% vs. 18.2%), payday loans (5% vs. 5.3%), personal loans (14.2% vs. 16.5%), and other debt (6.8% vs. 9.4%). Compounding interest charges, along with the payments, highlight a need for better help amongst those struggling with debt.
Relatedly, the research also shows that women have shorter job tenures than men, at a median of six years compared to eight years for males. Ten percent of men also had a tenure of one year or less compared with 17% of women.
Having a shorter tenure can affect retirement savings in several ways, says T. Rowe Price. Since retirement plans have different vesting schedules, leaving a plan too early—whether willfully or through termination—can deny employees of a portion of their retirement contributions.
Additionally, workers who change jobs after a short period with an employer tend to have smaller balances, and therefore end up deciding to withdraw instead of staying within the plan or rolling it over.
Additional findings from the T. Rowe Price study can be found here.
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