Do Women Need to Save More When Planning for Retirement?

UPDATED: October 11, 2023
PUBLISHED: May 8, 2023
Middle aged woman in a beautiful location retirement planning for women and holding a cup of coffee

According to the U.S. Department of Labor, women working full-time earn an average of 84 cents for every dollar a man earns. While that gap can vary based on age, race and other factors, the harsh truth is, when planning for retirement, most women have to work harder to save the same amount as men. In addition to lower pay, women typically work fewer years and tend to live longer than men. 

While we work on changing this reality for our daughters, women can also take steps now to ensure they’re ready for whatever comes their way in retirement.

Retirement planning for women: Why do women save less? 

Although the gender wage gap is a large part of the problem, it’s not the only factor that keeps women from saving more when planning for retirement. 

On average, women in the U.S. and other developed parts of the world live an average of four to seven years longer than men in the same countries. That means most women must plan to make their savings last several years longer than a male partner would need. 

Additionally, women are more likely to take part-time work or positions that don’t provide access to a company 401(k) or other retirement plan. Among U.S. workers employed part-time, 6 in 10 are women. According to the U.S. Bureau of Labor Statistics, 22.5% of all working women work in part-time positions, compared to 11.7% of all working men.

Women are also more likely to leave the workforce to care for family members such as a child or an aging relative. This can mean they fall even further behind the wage gap.

While this may feel bleak, women can take a few steps to ensure financial security.

How can women catch up with retirement planning?

Saving more through an employer’s retirement program can be a great way to help prepare for the future. However, there are additional steps women can take when planning for retirement. 

Start saving early

One of the best ways women can ensure they have enough put aside for their later years is to start saving as early as possible. Take advantage of the magic of compound interest and start contributing to a 401(k) or other retirement account as soon as possible.

If your employer offers a matching sum or percentage, try contributing at least enough to get the full match or get as close as you can. Not taking advantage of the match means leaving free money on the table. 

Negotiate for a higher salary

It may be uncomfortable, but negotiating a pay raise can significantly add to your retirement savings. Not only does getting a higher salary mean you can contribute more to your retirement accounts, but your Social Security payment is based, in part, on your highest 35 years of earnings. This means you can start saving more now, and you’ll receive more from Social Security in retirement.

Just don’t let your lifestyle negate your increase in pay. You work hard and deserve a little fun, but curb the impulse to increase your shopping budget or upgrade your living space before you bump up your retirement accounts.

Invest your money

Investing does carry some risks, which can be hard to tolerate when trying to protect your retirement savings. It might feel safer to leave your money in a high-yield savings account where it’s safe from market swings. However, you will likely never match the potential return of investing in the stock market by leaving your money in a savings account. 

It is uncomfortable to watch your investments drop during market downturns, but remember that investing for the long haul is the way to go, especially when planning for retirement as a woman. The longer you leave your money in the market, the longer your money will go to work for you. 

Focus on creating a diversified portfolio that can help reduce the potential losses of investing too heavily in a single asset.

Talk to a professional

Even if you have used a retirement calculator and set up your own retirement accounts through your employer or a robo-advisor, talking to a financial planner can be a great way to confirm you’re on the right path. 

Be sure to look for a financial planner who is a fiduciary. It means they are legally and ethically required to put your interests ahead of their own. Many financial planners offer hourly or fee-based services, so you don’t have to commit to one adviser long term.

Find other ways to save for retirement

Investigate other ways to save for retirement, like starting a Roth IRA with some of your after-tax dollars. Contributing to both pretax accounts, like a 401(k) or a traditional IRA, and after-tax accounts, like a Roth IRA, can help you maximize your retirement savings and avoid paying more in taxes than you have to during retirement. 

IRAs: Other ways women can save and plan for retirement 

While there are no retirement accounts that apply only to women, there are several options beyond a traditional 401(k). An individual retirement account (IRA) is a great way for women to plan and save for retirement or to supplement their 401(k). 

IRA accounts can be tax-deferred or tax-advantaged and include investments like stocks, bonds, index funds and exchange-traded funds or ETFs, among others. Remember to pick investments after opening an IRA. Otherwise, your money will just sit in the account without earning any returns.

Before opening multiple IRA accounts, it’s important to note that the IRS limits the total you’re allowed to contribute to traditional and Roth IRA accounts. Each type of IRA account also has its own rules and limitations. So, work with a financial professional to help you understand which account will work best for you. 

For example, in 2023 the total you can contribute across all your traditional and Roth IRA accounts is $6,500 or $7,500 if you are over age 50. To contribute to a traditional and Roth IRA in the same year, you’ll have to split the maximum you’re allowed to contribute across the two accounts. 

Types of IRAs to consider

Traditional IRA: If you don’t have access to a retirement plan at work, a traditional IRA lets you take advantage of the same pretax contributions as a 401(k). Yearly contributions may even be tax deductible if you qualify. Earnings grow tax-deferred until you’re ready to withdraw them in retirement. 

There are no income limits to open a traditional IRA. However, you’ll likely have to take the required minimum distributions after age 73. 

Roth IRA: These are funded with after-tax dollars. Earnings will grow tax- and penalty-free until you withdraw funds after age 59½ and as long as your account has been open for at least five years. 

Contribution limits start to reduce if you make more than $138,000 as a single tax-filer ($218,000 for people filing jointly). 

Spousal IRA: This allows a person with no or low annual income (like a stay-at-home parent) to hold a tax-efficient retirement account the working partner contributes to. To qualify, you must be married, filing taxes jointly.

You can choose between a traditional or a Roth IRA. The spousal IRA is not a joint account, and there are income and contribution limits. It’s best to work with a qualified tax professional to set one up. 

SEP IRA: This gives freelancers and small business owners access to tax-deferred retirement savings. This means you can contribute pretax dollars now, and you’ll pay taxes on withdrawals in retirement. The employer, not the employee, generally contributes to a SEP (simplified employee pension) IRA.

The most significant benefit of the SEP IRA? It has the largest contribution limits among IRAs. In 2023, employers can contribute up to 25% of an employee’s salary or $66,000, whichever is less. If you’re self-employed, contributions are generally limited to about 20% of your net income. 

Bottom line of retirement planning for women

Women are often socialized to care for others’ needs before their own, but that can backfire when planning for retirement. If you aren’t already contributing to a retirement account, talk to a financial planner or accountant to determine the best plan and start contributing. If you already have a 401(k), consider bumping up your contributions to help you reach your goals. 

This article was updated October 2023. Photo by Jacob Lund/