The Gender Retirement Gap

Women generally are at a disadvantage compared to men when it comes to retirement planning and funding. When faced with the question “How much do I need to save for retirement?”, many women do not factor in the unique hurdles to their gender which will have a huge impact on their funding.

One of the factors that women need to consider is that they generally, on average, live longer than men. This means that they will need to make allowance for this when planning their retirement, ensuring they will have enough saved to cover for these extra years while retaining an acceptable lifestyle.

Women still, on average, earn 23% less than a man earns in the same or similar position, according to Statistics SA. This means that not only is their portion of salary they put away smaller, assuming they allocate a similar percentage of their taxable income, they also have less money to work with.

The third important factor to consider is that women often put their careers on hold to have children, sometimes for a period of years. During this time, their contributions to their retirement fund stops and they are unable to reap the rewards of compound interest on those additional funds. There is also the temptation of cashing out on Pension or Provident funds when taking this leave of absence.

The fourth and often forgotten consideration is that women returning to mainstream employment after an extended leave of absence, often re-join at a lower salary compared to having received annual increases to date.

For a woman to have the same retirement income as her male counterpart, in these circumstances, they must put away a much larger sum of money, monthly or annually but should also start contributing early on in their career, (from the first paycheck if possible) especially if they are hoping to be financially independent of their partner at retirement.

Another South African statistic is that 50% of marriages fail, which means that women may not have the benefit of the joint retirement fund. A woman should also be aware, that in the event of a divorce, the spouse should be entitled to half of the other party's fund value.

If you are a woman and wanting a stable retirement plan, here are some tips to bear in mind:
• Save and invest independently of your partner.
• Keep your retirement savings safe and avoid the temptation to dip into this fund early, when leaving a company Pension or Provident fund.
• If you want to retire at the same time as your partner but you are different ages, you will need to factor this in and ensure you are putting away enough for this to be possible.
• Pushing out your retirement date will have a significant effect on your savings. Ask your Financial Planner to show you the difference in savings between retiring at 60 or retiring at 65.
• Plan ahead and factor in possibilities like sickness and disability into your savings roadmap. Chat with your Financial Planner about safeguarding against any risks.
• Make sure that your lifestyle in retirement remains sustainable, this does not mean going to live with or off your children.

If you would like to know more or want some assistance in your Lifestyle Retirement Plan, please do not hesitate to get in touch with me.