Sandy Govender, Head of Group Insurance at Momentum, discusses how women can plan for retirement.
There are some fundamental differences between men and women that can impact on retirement savings. For example, on average, women live seven years longer than men, which means that they are more likely to outlive their retirement savings. Women also tend to spend fewer years in the workforce and experience more career interruptions due to factors like maternity leave and being primary caregivers.
Bridled to the fact that men typically earn more than women, this leaves women with an even bigger gap at retirement. For every rand saved for retirement, women will receive approximately 20% less retirement income than men due to the expectation that they will live longer.
While it might seem daunting to navigate these realities, below are four tips on how women can plan for the future in light of these challenges.
1. Start saving young
The large majority of South African individuals do not save enough for their retirement. We recommend that women already start saving in their 20s. This might seem like quite a balancing act as young adults tend to spend the bulk of their money and savings on cars and houses. Couples also tend to start their married lives in debt because of wedding expenses, which can further eat into one’s savings. At the same time, they see retirement as something far off. This procrastination will only lead to stress later in life – when they do start saving for retirement they will need to put aside a large portion of their income to make up for the lost savings time.
2. Contribute to your own retirement arrangement
While there are alternative methods of adding to your retirement nest egg – such as investing in property or equities that have a higher-than-inflation return – these options are not tax free, unlike investing in your company retirement arrangement or a personal retirement annuity. It is important for women to make additional contributions via retirement arrangements as contribution guidelines are not always adequate.
3. Become financially independent
The reality is that women need to start saving more than men and for a longer period to help protect themselves against not having sufficient money in retirement. In this regard it is important for women to take ownership and create safety nets for themselves by becoming financially-savvy. A little bit of planning now can lead to a lot less stress ahead. If you are unsure about how exactly you can plan for your specific situation, chat to your financial adviser.
4. Retire when you are best positioned to
Sometimes women retire when their husbands do, cutting short their period of savings which means that they start drawing down on their capital earlier than they should. Remember, the longer you work, the more likely you are to enjoy a comfortable retirement.
Women might face more speed bumps than men on the road to retirement, but it’s nothing that we cannot take in our stride. All it takes is a long-term perspective coupled with some smart thinking, and you are well on your way to a fulfilled retirement.
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