Gender Inequality in Retirement Savings Persists

Workplace pauses for childbirth, parental leave and childcare responsibilities continue to impede financial planning for women and lessen their retirement readiness, as compared with men’s, new data shows.   

Out of every 10 women who took time out of the workforce during their careers, about three later came out of retirement to return to work, compared with 14% of men who had a pause from work. Women who pause their careers are also more likely to have begun their retirement savings later: 39% began between ages 30 to 39, compared with 27% for those who did not take time out of the workforce. Additionally, 20% of women are “very concerned” about outliving their retirement savings, compared with 9% of men, the Charles Schwab Retirement Plan Services data showed.

“One of the cornerstones of financial planning and retirement savings is to start early,” says Marci Stewart, director, communication consulting and participant education for Schwab Workplace Financial Services, by email. “That takes on even more importance if you’re going to take any time out of the workforce for any reason. Starting early allows your savings to potentially compound and grow at an accelerated rate. It also can build in some cushion room for greater work flexibility. The numbers show that women are taking time out of the work force at higher rates than men, but the guidance to start early applies to everyone. Plan sponsors can help encourage that.”

Women historically have lived longer and saved less for retirement due to traditionally earning less and often taking breaks from the workforce due to caregiving responsibilities. Overall, women respondents were twice as likely to take time out of the workforce while employed, driven by family and health needs, Schwab found.

Reasons for taking time out of the workforce vary between men and women, the data showed. Among the retired women surveyed who took time out of the workforce while employed, the most frequently cited motivation was the birth of a child or parental leave to care for a child—70% for women, versus 6% for men—and childcare (37% of women, 4% of men), according to the survey.

Other reasons cited for taking time out of the workforce also showed gender disparities. Health concerns, disability or illness motivated 23% of women, compared with 12% of men to take time off; exploring a career change prompted 17% of women, compared with 16% of men; getting an advanced degree prompted 10% of women, compared with 12% of men; leaving a toxic work environment prompted 14% of women, compared with 7% of men; and caregiver/elder care prompted 7% of women versus 10% of men, Schwab found.  

Companies have reviewed their benefits offerings across retirement, health and other categories to ensure they are equitable for women and families, in some cases boosting pay and benefits. Despite these efforts, the Schwab data demonstrated the need for more work by employers to build greater retirement equity between men and women.  

“For example, auto-enrollment and auto-increase features within 401(k) plans have proved helpful in boosting participants’ savings,” adds Stewart, by email. “The good news is that most women (91%) feel comfortable about their retirement savings, even if they have more concerns about their preparedness than men.”  

Schwab survey results come from a study of 1,000 American investors between the ages of 22 and 88 with investable assets between $50,000 and $5 million or more, questioned in June 2023.