The average 401(k) account balance among men is 50% greater than women's overall ($89,000 vs. $59,000), but this gender imbalance among younger generations apparently is closing.
According to Bank of America’s 2023 Financial Life Benefits Impact Report, Baby Boomer (ages 58-76) and Gen X (ages 43-57) men, not surprisingly, have significantly greater account balances than women in their generations (87% vs. 53%, respectively).
However, the gap between Millennial (ages 28-42) men and women is only 23%, at $29,218 for men vs. $23,715 for women. Gen X, meanwhile, continues to have the highest 401(k) participation rate (65%) across generations, followed by 57% of Baby Boomers and 55% of Millennials.
“The gender savings gap is an issue we can and must address. It carries personal implications for many, as well as macroeconomic implications for us all,” says Lorna Sabbia, head of Retirement and Personal Wealth Solutions at Bank of America. “We are encouraged by the strides young, female employees are making, and want to encourage everyone to invest in their futures and leverage the workplace benefits available to them.”
The study, which examines trends within 401(k) plans, health savings accounts (HSAs), equity compensation and employee banking programs, is based on data from Bank of America's proprietary employee benefits programs, which serve more than 25,000 companies and more than 6 million employees.
Staying the Course
Beyond the closing of the gender savings gap, the study also found that plan participants largely stayed the course with their savings, albeit with some slight dips. When looking at 401(k) savings plans as of the end of last year:
- Participation rates dropped only slightly to 56% from 58% in 2021.
- Average contribution rate declined to 6.4% from 6.6% in 2021.
- Twenty-six percent of participants increased their contribution rate, while 8% decreased their savings rate.
- The number of participants contributing small amounts (less than $5,000) increased to 66% (from 61% in 2021), while only 9% took full advantage of their 401(k) plan by contributing the maximum amount allowed (more men than women contribute the maximum amount at 10% vs. 7%, respectively).
- Overall account balances declined by 17%, related to stock and bond market declines.
- When 401(k) plans include an auto-enroll feature, most employees (85%) participate, compared to just 36% participation without this feature.
- Plans with auto-enrollment that also incorporate auto-increase features rose slighlty, from 57% vs. 55% in 2021.
Additional findings show that employees are leveraging other benefits—such as HSAs, equity awards and other financial resources to pursue their goals.
HSA account holders are evolving from “spenders” to “savers.” A larger percentage of HSA participants contributed more than they withdrew (38% vs. 26% in 2021). That said, there is still room for improvement, as more assets were held in cash deposits (58%) compared to longer-term investments (42%). In addition, the average HSA account declined by 6% in 2022.
Financial education resources are top of mind. Employees are eager for education, with top interests including retirement (70%) and budgeting (23%). Participants would prefer to learn by attending a webinar (69%), followed by a short video (36%) and visiting a website for information (31%).
More employees received equity awards in 2022, though values were lower. According to the findings, 23% more participants received awards in 2022 than in 2021. However, there was a 16% decline in average shares outstanding per plan and a 30% decline in the value of outstanding shares at year-end.
