Why Women Face a Greater Retirement Savings Gap and How to Close It

March 8th marks International Women's Day, a time to celebrate the achievements and progress made by women worldwide. 

Yet, as we recognize these accomplishments, it’s important to address the financial disparities that persist, particularly regarding retirement savings. While women today are leading in many sectors, they still face significant challenges in securing their financial futures. 

This blog will explore why women have a greater retirement savings gap and how they can take steps to close it. Here’s what you need to know.

Understanding the Retirement Savings Gap

Women are facing a growing retirement savings gap, and it cannot be ignored. A Transamerica Institute report revealed a significant gap in retirement savings between women and men across generations. This study highlighted that Baby Boomer women have a median retirement savings of $166,000, while Baby Boomer men hold more than double that amount, with median savings of $410,000. This gap is caused by a combination of factors, which range from income disparity to longer life expectancies and caregiving responsibilities.

The retirement savings gap is not just a minor inconvenience—it can have serious consequences for women as they approach retirement. Women are more likely to experience financial insecurity in retirement. Without proper planning, they may find themselves unprepared for the rising healthcare costs, housing, and daily expenses in their later years.

Key Factors Contributing to the Retirement Savings Gap

1. The Gender Pay Gap

Despite progress in recent years, women still earn less than men on average. The U.S. Census Bureau reports that women earned about 84 cents for every dollar earned by men. Lower wages mean less money to contribute to retirement savings. Women are more likely to work part-time or have career gaps due to personal or family responsibilities, which further limits their ability to save.

2. Longer Life Expectancies

Women tend to live longer than men, which means they will likely spend more years in retirement. According to the Centers for Disease Control and Prevention (CDC), the average life expectancy for women in the U.S. is 80.2 years, while for men, it’s 74.8 years. The longer lifespan increases the amount of money women need to cover their living expenses throughout retirement. However, the reality is that many women simply don’t have the savings to support them for such a long period.

3. Caregiving Responsibilities

Women are more likely than men to take on caregiving roles, whether caring for children or aging parents. According to the National Partnership for Women & Families, nearly 65% of unpaid caregivers in the U.S. are women. These caregiving responsibilities often lead to career interruptions, part-time employment, and lower lifetime earnings. All of these factors contribute to lower retirement savings. Additionally, caregiving often means that women may be unable to take full advantage of employer-sponsored retirement benefits, such as matching contributions to 401(k) plans.

4. Access to Retirement Plans

Women are also less likely to have access to retirement savings plans through their employers. According to the U.S. Department of Labor, more than 4 in 10 working women do not have access to an employer-based retirement plan. This lack of access makes it more difficult for women to consistently save for retirement, further exacerbating the gap between men and women.

5. Investment Knowledge and Confidence

A 2024 survey by New York Life found that while women report high confidence in managing day-to-day finances, such as paying bills and maintaining good credit, they feel less knowledgeable about long-term financial topics, including:

This lack of investment strategy can limit the potential growth of their retirement funds, leaving them with less money to live on in retirement.

The Cost of the Retirement Savings Gap

The implications of the retirement savings gap are substantial. With women facing longer lifespans and earning less over their careers, they are more likely to experience financial hardship in retirement. According to a study by the Transamerica Center for Retirement Studies, only 58% of women are confident that they will have enough money to live comfortably in retirement, compared to 68% of men.

This gap in retirement confidence is directly tied to a lack of financial preparation. Without enough savings, women may have to rely on Social Security or other sources of income, which are often insufficient to meet all their needs. Many women also face higher healthcare costs in retirement, as they tend to live longer and are more likely to experience chronic health conditions as they age.

Closing this gap is essential for women to achieve financial independence and live the retirement they deserve.

How to Help Close the Retirement Savings Gap

  1. Start Saving Early and Consistently
    The earlier you start saving for retirement, the better. Time is one of the greatest allies in growing wealth through compound interest. Women should aim to start saving for retirement as soon as they begin their careers. Regular contributions to retirement accounts such as 401(k)s or IRAs can help build a secure financial foundation for the future. Even small, consistent contributions can add up over time.
  1. Maximize Employer-Sponsored Retirement Plans
    If your employer offers a 401(k) plan, take full advantage of it. Contribute enough to receive the employer match, which is essentially free money. Additionally, consider increasing your contributions over time if you have the option. The more you contribute, the better your chances of building a substantial retirement nest egg.
  2. Work with a Financial Professional to Build a Strategy
    While women should feel empowered to take an active role in their retirement planning, it’s always helpful to work with a professional. They can help guide you in developing a financial strategy that aligns with your long-term retirement goals. At NJM Wealth Preservation Strategies, we focus on supporting individuals in developing strategies that help ensure they are on track for retirement success.
  3. Consider Delaying Social Securit
    If possible, delaying Social Security benefits may help give women a larger monthly benefit once they begin drawing on it. The longer you wait to receive Social Security, the higher your monthly payments will be. This strategy can be particularly beneficial for women, given their longer life expectancies.
  4. Leverage Spousal Benefits
    Married women may have opportunities to benefit from spousal Social Security benefits. If your spouse has a higher earning record, you may be able to claim a portion of their benefits rather than your own. This strategy can help maximize the total Social Security income you receive.

Final Thoughts

The retirement savings gap between men and women is a significant challenge, but it is one that can be overcome with proper planning and strategy. By understanding the unique factors contributing to this gap and taking proactive steps to close it, women can build a secure and comfortable retirement.

At NJM Wealth Preservation Strategies, we are committed to helping women navigate the complexities of retirement planning. With our experience in wealth preservation, we can help you make informed decisions that will help secure your financial future.

Contact us today to schedule a complimentary consultation. 

Retirement Planning FAQs

1. How do I know if I’m saving enough for retirement?

It can be difficult to determine whether you're on track with your retirement savings. A good starting point is to calculate how much income you'll need in retirement, considering factors like your desired lifestyle, living expenses, and healthcare costs. You can then assess your current savings rate and adjust accordingly. Many financial planners offer retirement calculators to estimate how much you should save each month. If you're unsure, consulting with a financial professional can help you find a plan to meet your retirement goals.

2. What is the best type of retirement account for women?

The best retirement account depends on your unique financial situation, including your income level, whether your employer offers a retirement plan, and your long-term savings goals. Common options include 401(k) plans, IRAs (Traditional or Roth), and Health Savings Accounts (HSAs). Each has its advantages—401(k)s often come with employer matches, Roth IRAs allow for tax-free withdrawals, and HSAs can help cover future medical expenses. It’s important to consider your goals and consult with a professional to determine which account types suit you best.

3. What are some common mistakes women make when planning for retirement?

Some common mistakes include underestimating retirement expenses, not contributing enough to retirement accounts early in their careers, and failing to invest sufficiently for long-term growth. Additionally, neglecting to account for healthcare costs and not considering strategies like delaying Social Security benefits can lead to gaps in retirement funding. Women may also fall short due to gaps in employment caused by caregiving responsibilities, which can impact their retirement savings over time.

4. How can I balance retirement savings with other financial goals?

Balancing retirement savings with other financial priorities, such as buying a home, paying down debt, or saving for your children’s education, can be challenging. One approach is to prioritize retirement savings early, especially if your employer offers a retirement plan with a matching contribution. Setting up a budget and using strategies like automatic transfers to retirement accounts can help ensure that future savings don’t take a back seat to other financial goals. It’s also wise to regularly review and adjust your plan as your financial situation evolves.

5. What should I do if I have a gap in my work history due to caregiving or part-time employment?

It’s important to compensate for lost time by increasing your retirement contributions once you're back in the workforce. If you’ve had a break in your career or worked part-time, you might have missed opportunities to contribute to employer-sponsored plans or personal retirement accounts. Once you can, try to maximize your retirement contributions and take advantage of catch-up contributions if you are 50 or older. Additionally, if you’re caring for family members, check if you’re eligible for any government programs or tax benefits that could help offset caregiving costs and retirement savings.

Disclaimer: NJM Wealth Preservation Strategies does not provide specific investment advice or endorse any investment products. Any information provided in this blog is for educational purposes only and should not be construed as financial or investment advice. Always consult with a professional before making any investment decisions.