While women still lag far behind men when it comes to retirement savings, Gen Z women – those 26 and younger – are bucking that trend and actually saving more than men their age, according to a report released today by Bank of America Corp.
The 2022 Financial Life Benefits Impact Report found a significant gender disparity overall when it comes to how many women vs. men participate in a 401K, with 62 percent of men investing vs. just 55 percent of women. Men also have 55 percent more in their 401K balances than women ($108,000 vs. $70,000).
However, Gen Z women – those born between 1997-2012 – are breaking that barrier. According to the report, women in that age group have overtaken their male counterparts in total retirement savings, with 3 percent higher account balances on average.
The findings are in line with a report released earlier this year by Fidelity Investments, which found that younger women opened retirement accounts around age 20, compared to peers of older generations, who opened them at 34.
“Historically, men have significantly outpaced women both in terms of engaging with workplace benefits and investing,” said Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America (NYSE: BAC). “It’s inspiring to see younger women bucking trends and changing this narrative.”
The Bank of America report also found a majority of employees participate in 401K, but there is still room for improvement. Gen X males – those ages 42 to 56 — are the most likely to contribute, with 70 percent contributing to their 401K; women ages 57 and older were the least likely to contribute to a 401K.
According to a recent report by investment firm T. Rowe Price, women face unique challenges when saving for – and supporting themselves through – retirement. For one, women earn less than men and end up saving less for retirement as a result. They also generally live longer than men, making it even more important to have enough set aside for a longer retirement.
“While there is progress among women saving for retirement, the gap between men’s and women’s retirement savings persists,” said Judith Ward, thought leadership director for T. Rowe Price. “It’s a likely follow-through resulting from lower lifetime earnings.”
In a nutshell, she said, lower salaries coupled with lower contribution rates have resulted in lower retirement account balances. She recommends women educate themselves about finances and investments.
“Ultimately, women need to take their own needs into consideration when planning for retirement,” Ward said. “Taking steps to improve your finances, and being intentional about earnings and savings, can position you for a more secure retirement.”
Sabbia agrees and says early retirement planning is essential for women.
“Longer life spans mean larger nest eggs. Ninety-four percent of women surveyed noted that they will be solely responsible for their finances at some point in their life,” she said. “We must build on the savings momentum of younger women, so women of all ages feel confident, empowered and take action to invest in their futures.”
