New Report Reveals How Retirement Plan Design Can Address the Racial and Gender Retirement Savings Gap

The Collaborative for Equitable Retirement Savings today published its first report, “Racial and Gender Disparities in 401(k) Account Balances: How Large are They and What is Causing Them?” It examined anonymized 2022 data from nine 401(k) plan sponsors across approximately 180,000 active plan participants and found that, even after controlling for salary and tenure, significant race and gender disparities remain in account balances. The report attributes those differences to variations in contribution, loan, and preretirement withdrawal behavior.

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The Collaborative—including Morningstar Retirement, Defined Contribution Institutional Investment Association (DCIIA), and the Aspen Institute Financial Security Program—was formed in 2023 as a multi-stakeholder initiative to understand the complex decisions of savers and make retirement savings more inclusive and efficient.

Additional findings from the first report include:

• Black and Hispanic females contribute lower percentages of their salaries than their counterparts after controlling for age, salary, tenure, and plan design variables.
• Black and Hispanic workers withdraw a larger portion of their account balances before retirement and take these preretirement withdrawals more frequently than their white counterparts. These differences grow more extreme the closer people get to retirement.
• Black participants have a higher probability of having an outstanding loan than their white counterparts. At ages 55-59, both Black men and Black women have a 49% probability of having a loan outstanding.
• The report’s simulation results indicate that eliminating preretirement withdrawals would substantially mitigate race and gender disparities, particularly for early- and mid-career 401(k) participants.

“It’s well known that there are racial and gender disparities in retirement account balances, but these disparities are not fully explained by different economic circumstances such as income or tenure,” said Jack VanDerhei, director of retirement studies for the Morningstar Center for Retirement & Policy Studies and the report’s lead author. “This paper is the start of a multi-phased effort to model the effects of these disparities and test the effectiveness of different steps employers and policymakers could take. Our initial findings suggest that reducing preretirement withdrawals can significantly narrow racial and gender disparities in 401(k) outcomes.”