Gender gap in retirement readiness persists, but younger women bucking the trend

Women traditionally have lower levels of confidence in their financial security and are less optimistic about their retirement preparedness than men, but young women are challenging that trend.

Nearly six in 10 Gen Z women said they believe they will be financially prepared for retirement, according to Northwestern Mutual’s 2023 Planning & Progress Study. That is a significantly higher proportion than women in other generations, including Gen X women who were least confident in their retirement preparedness with only 38% saying they will be financially prepared when they reach retirement.

Younger women also showed a greater awareness that their financial plans need improvement, with 79% of Gen Z and 76% of millennial women saying their financial planning could improve. In addition, younger generations of women are more likely to prioritize saving over paying down debt than their older counterparts, the study found.

Overall, 43% of American women feel financially secure, compared with 59% of men, and 44% of women think they will be financially prepared for retirement, compared with 61% of men.

“What our research tells us is that there is a gender gap in financial confidence,” said Tim Gerend, chief distribution officer at Northwestern Mutual. “The impact of inflation and the worries people have about recession and retirement are felt unevenly, but they are significant for both women and men.”

More than six in 10 men in America believe Social Security will be there when they need it; less than half of women agree. Beyond the notable differences between women and men, the findings also reveal some interesting generational differences among women. Six in 10 boomers+ women are confident Social Security will be there when they need it, compared with about half of Gen Z women, 39% of millennials and 37% of Gen X.

“Gen X is ‘gen anxious,’ but there is still an opportunity for these women to build financial security if they act intentionally,” said Veronica Fuentes, a Northwestern Mutual managing director based in Washington, D.C. “For anyone feeling like they are falling behind, it’s not too late for any woman to have a conversation with an advisor to understand the fastest and most reliable strategies to build and protect wealth.”

Retirement preparedness may be especially important for younger women, many of whom expect to have a long retirement: 39% of Gen Z women and 32% of millennial women believe they’ll live to 100 years old, according to the report. That compares with 23% of Gen X and 20% of baby boomer women. According to the U.S. Centers for Disease Control and Prevention, the average lifespan of women in America is 79 and the U.S. Census Bureau projects that the life expectancy rate for women will surpass 87 years by 2060.

Related: Women face a ‘harrowing’ road to retirement: How employers, advisors can clear roadblocks

Women’s greatest concerns about retirement align closely with those of men, topped by outliving savings, declining health and boredom. Gen Z women are significantly more concerned than their older female counterparts about isolation from friends, family and coworkers; missing their career; and drifting (feeling uncertain or indecisive about where to focus their time, attention and energy during retirement).

“I speak to my younger clients often about starting early, increasing retirement contributions each year and addressing risks to protect what they’ve already built,” said Fuentes. “With the right lifestyle and choices in life, many in younger generations may live to age 100, so it’s exciting to see them consider what their ‘second act’ in retirement might look like. If Gen Z can get started with financial planning early, this will allow them the financial freedom and flexibility to figure out what they’ll do next without the added pressure.”