My niece, Shannon, opened a Roth IRA when she was 19. Last year, at 23, after graduating from Duke University and landing her first post-college position, she immediately signed up for her employer’s Roth 401(k).
That’s my girl.
The average age women in Shannon’s age cohort between 18 and 35 open a retirement account is 20, according to Fidelity Investments’ new 2022 Money Moves Study of 2,015 American adults 18 and older who have investment accounts.
That’s 14 years younger than the average age women 36 and over reported opening their first retirement account. And, boy, do those women who delayed wish they could have a do over. More than a third of the older women (36%) said they regret they waited too long to start saving for retirement, according to the findings.
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Younger women are also starting to invest outside of retirement accounts earlier than their older counterparts, according to the study. More on this shortly.
“It’s no secret that the pandemic has had a disproportionate impact on women,” Lorna Kapusta, Fidelity’s head of women investors and customer engagement, told me in an interview this week. “What’s surprising is just how much these events have served as a catalyst for young women to make their finances a priority.”
These findings are notable for these young women’s future financial security.
“Since women are more likely than men to live longer, with a statistically good chance of living into their mid-90s, they need to build a retirement nest egg that can last,” Kapusta said, “requiring women to plan differently.”
Automatic 401(k) plans are a catalyst to saving at a younger age
This is quite an about-face from the findings that Merrill Lynch and Age Wave found four years ago in their study “Women and Financial Wellness: Beyond the Bottom Line.”
“Sixty-one percent of women would rather talk about their own death than money,” said Maddy Dychtwald, co-founder of Age Wave.
In that report, less than half (45%) of millennial women said they were confident in investing and about 63% of women ages 18 to 29 said “financial planning is too difficult to even think about,” Dychtwald said.
Other headwinds hit women, too. Women hold two-thirds of America’s student loan debt, according to a report from the American Association of University Women (AAUW).
There's also the gender pay gap, which fortunately is moving in the right direction for many younger women. In 2020, women ages 25 to 34 earned 93 cents for every dollar a man in the same age group, according to the Pew Research Center. In 1980, women ages 25 to 34 earned 33 cents less than their male counterparts.
And these new findings from Fidelity give me hope. One reason I believe that young women are setting aside retirement funds earlier than they did when I was starting out is that an increasing number of employers now automatically enroll new employees in their 401(k) plans.
Sixty-two percent of 401(k) plans now use an automatic enrollment feature, according to a recent survey released in December by the Plan Sponsor Council of America (PSCA), a nonprofit trade association. And for the first time, the most common default deferral rate is now 6% of pay rather than the 3% of pay that has been the norm since 2006.
Automatic enrollment simply makes saving easier. Almost a quarter (23%) of women on Fidelity’s 401(k) platform were automatically enrolled in their company’s 401(k) retirement savings plan, according to Kapusta.
Younger women are investing earlier
I’m over the moon that younger women have started to stash away for retirement younger than I ever dreamed of doing. Establishing a savings habit is our ballast.
These younger women are also investing outside of their retirement account with half reporting they started to do so in the past six months.
On average, young women began investing in a brokerage account at 21, according to the findings. Older women didn’t start investing in their own brokerage account until they were 30, on average. For me, it was 32.
Underlying these encouraging findings is what appears to be a major culture shift.
“More women are talking about money and investing,” Kapusta said. “It’s getting less and less taboo, especially among this younger generation.”
And consider this: The study found that 1 in 3 young women noted that their parents talked to them about the importance of investing for their futures when they were young. That’s a huge change from the women I grew up with who universally tell me that managing money was rarely discussed in their families – at least with them.
But I’ll take it. Out with the old, in with the new.
Kerry is a Senior Columnist and Senior Reporter at Yahoo Money. Follow her on Twitter @kerryhannon