Bank of America released its 2023 Financial Life Benefits® Impact Report, revealing that the average 401(k) account balance among men is 50% greater than women’s overall ($89,000 vs. $59,000).
However, this gender imbalance is closing among younger generations. Baby Boomer (ages 58-76) and Gen X (ages 43-57) men 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%. Gen X continue 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,” said 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.”
Based on data across Bank of America’s proprietary employee benefits programs, which serve more than 25,000 companies and more than 6 million employees, the Financial Life Benefits Impact Report examines trends within 401(k) plans, Health Savings Accounts (HSAs), equity compensation and employee banking programs.
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; 26% of participants increased their contribution rate as compared to 8% of participants who 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; 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-enroll that also have auto-increase rose (57% vs. 55% in 2021).
In addition to 401(k) savings plans, employees are leveraging other benefits such as HSAs, equity awards and other financial resources to pursue their goals. Top findings related to these benefits include more employees received equity awards in 2022, though values were lower; HSA account holders are evolving from “spenders” to “savers; financial education resources are top of mind; participants want to engage digitally.
“Employers serve an important role in ensuring that their employees are equipped with the best possible tools, resources and solutions for financial success and retirement planning,” said Kevin Crain, Head of Retirement Research & Insights at Bank of America. “We’re committed to working with employers to meet the needs of their employees, wherever they are in their financial journey.”