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Retirement

Closing the gender gap in IRA balances

There’s a gap between the median IRA balances of women and men, according to our research.
8 minutes   •   May 15, 2024
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There’s a gap between the median IRA balances of women and men, according to our research. A number of factors may hamper women’s ability to contribute,* but there are steps they can take to help narrow that gap.

Mind the (IRA) gap

The figure below shows that a gap exists between the median IRA balances of women and men across all generations, and that it is wider among older cohorts. While women’s IRA balances are at 98% of men’s at the median for Gen Z, women’s IRA balances are only 63% of men’s at the median for the baby boom generation.

There’s a gender gap in IRA balances, and it’s wider for older generations

A bar chart showing the median IRA balance for men and women broken down by generation. The horizontal axis shows four generations—Gen Z, millennials, Gen X, and baby boomers—while the vertical axis shows the median IRA balance in thousands of dollars.  The median IRA balance for men is higher than the median IRA balance for women in all generations, and it is larger among older generations. The smallest gap is in Gen Z, where the median IRA balance for women is 98% of the median for men. For millennials, the median IRA balance for women is 88% of the median for men. For Gen X, the median IRA balance for women is 81% of the median for men. The largest gap is among baby.
A bar chart showing the median IRA balance for men and women broken down by generation. The horizontal axis shows four generations—Gen Z, millennials, Gen X, and baby boomers—while the vertical axis shows the median IRA balance in thousands of dollars.  The median IRA balance for men is higher than the median IRA balance for women in all generations, and it is larger among older generations. The smallest gap is in Gen Z, where the median IRA balance for women is 98% of the median for men. For millennials, the median IRA balance for women is 88% of the median for men. For Gen X, the median IRA balance for women is 81% of the median for men. The largest gap is among baby.

Notes: Data reflects traditional and Roth IRA holdings for about 4 million Vanguard Personal Investor clients with funded IRAs, as of December 31, 2022.

Source: Vanguard.

 

Contribute early and often to narrow the gap

Contribution patterns in a sample of about 74,000 investors who opened IRAs at Vanguard from 2015 through 2022, about half of whom were women, illuminated how contribution differences may help explain the gender gap. Women typically opened their IRAs two years later than men and made contributions in five years over the eight-year sample period, whereas men typically contributed in six years.

While this may seem like a small difference, the power of compounding can add up, potentially making the gender divide even wider over time.

Women tend to open IRAs later and contribute less often compared with men

A table showing the median age when opening an IRA and the median number of years contributing for women and men over an eight-year sample, from 2015 through 2022. The median age at account opening is 32 for women and 30 for men, and the median number of years contributing is 5 for women and 6 for men.
A table showing the median age when opening an IRA and the median number of years contributing for women and men over an eight-year sample, from 2015 through 2022. The median age at account opening is 32 for women and 30 for men, and the median number of years contributing is 5 for women and 6 for men.

Notes: The research looked at a sample of about 74,000 qualifying female and male IRA holders, 48% of whom were women, who opened a traditional or Roth IRA at Vanguard by making a regular contribution in 2015 and maintained a positive balance through the end of 2022. We excluded rollover IRAs, inherited IRAs, and small business IRAs. We considered the tax year of the contribution, not the calendar year.

Source: Vanguard, as of December 31, 2022.

Don’t leave your rollovers uninvested

One way IRA investors may unknowingly falter, regardless of gender, is when rolling money into an IRA from another retirement plan, such as a 401(k). Funds rolled into an IRA are often put into a cash-like vehicle by default unless an investor picks funds to invest in when making the rollover, or their investments are brought over “in kind” from their retirement plan to their IRA.

Said another way: An allocation from another retirement plan does not automatically carry over into an IRA. If rollover funds are not invested, an investor can’t capitalize on long-term market returns.

Our research shows that a larger proportion of women leave rollover funds uninvested compared with men, as illustrated in the figure below. On average, 56% of women who make an IRA rollover miss out on one year of market returns by leaving funds uninvested (compared with 44% of men), and 33% miss out on seven years of returns (compared with 23% of men).

However, when women do invest, they tend to build well-diversified portfolios to meet their financial goals. Our data as of December 31, 2022, show that about 44% of women with IRAs were using professionally managed allocations, either by holding a target-date fund or a balanced fund or by enrolling in an advice service, compared with about 40% of men. 

When rolling money over into an IRA, women are more likely than men to leave it uninvested

A line chart showing the percentage of clients who did not make a subsequent trade after rolling over funds into an IRA. The percentage of clients who did not make a trade decreases over time for both men and women. For women, the percentage drops from 100% to 56% by the end of the first year and slowly declines to 33% by the end of the seventh year. For men, the number drops from 100% to 44% by the end of the first year and slowly declines to 23% by the end of the seventh year.
A line chart showing the percentage of clients who did not make a subsequent trade after rolling over funds into an IRA. The percentage of clients who did not make a trade decreases over time for both men and women. For women, the percentage drops from 100% to 56% by the end of the first year and slowly declines to 33% by the end of the seventh year. For men, the number drops from 100% to 44% by the end of the first year and slowly declines to 23% by the end of the seventh year.

Notes: This data reflect rollovers of at least $1,000 into Vanguard IRAs since 2015. We only included rollovers that entered the IRA entirely in cash (so that at least one subsequent trade was necessary to invest the funds). We also only counted clients who still had a positive IRA balance at the end of December 2022. The data includes about 67,000 clients for whom we have gender information, 41% of whom are women.

Source: Vanguard, as of December 31, 2022.

Small changes can lead to better outcomes for women with IRAs

While any number of factors may contribute to some women opening IRAs later and contributing less frequently than men, for those in a position to do so, some small changes may help close the gap. In the meantime, our research shows that gap is already narrowing among younger generations such as Gen Z and millennials.

For any women thinking about opening an IRA or unsure if you've invested your rollover funds, consider putting time on your side by investing in yourself: Open an account, contribute to it early and often, and, if you make a rollover, be sure to select funds to invest in.

Explore resources for retirement planning

Additional contributors:

  • Tom De Luca
    Senior Researcher, Investor Behavior
  • Marsella Martino
    Vanguard Investment Strategy Analyst

Related links:

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*On the gender wage gap: Equal Pay Day 2023 (Equal Pay Day 2023: Department of Labor initiatives seek to close gender, racial wage gap, increase equity in federal programs | U.S. Department of Labor (dol.gov), U.S. Department of Labor, March 2023. For data on women's labor force participation rates, see the Bureau of Labor statistics Women's Databook 2021.
 

All investing is subject to risk, including possible loss of the money you invest.

Diversification does not ensure a profit or protect against a loss.

Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the work-force. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target-date funds is not guaranteed at any time, including on or after the target date.