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.

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.

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 1) an investor picks funds to invest in when making the rollover, or 2) 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. 

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.

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• SECURE 2.0—What’s new in 2024 (article, issued January 2024)