By Mandy Porter, Alexander Forbes senior financial adviser
Women could live to up to eight years longer than men according to research by the World Health Organization. As a result, women need to save more, for longer, to provide for a dignified retirement.
Research by Stellenbosch University’s Nic Spaull and Hendrik van Broekhuizen in 2018 found that women in South Africa get paid 15% to 17% less than men for the exact same work. What this translates to is that women also save less than men. Additionally, single women who are raising children and running their household alone are under more financial pressure than those who are married and have a dual income.
Here are some insights into what you should be thinking about to set you on a path to financial well-being:
What to think about:
1. Caring for the caregiver
Taking time off work to be care for a spouse, aged family member or children means women are likely to save less for retirement. The need for additional financial support should, therefore, be part of every woman’s future retirement plan. It’s also advisable for women to put away enough money to see them through if they plan to take a break from their full-time career at some point.
2. Lower annual retirement incomes
Women may be saving, but they are not saving enough. Misinformation can be dangerous, so be sure to speak to a financial adviser if you resign, or find yourself retrenched or dismissed. They will give you the best advice on what to do with your retirement savings to keep them growing. Saving for your future needs is, after all, your priority if you want to retire with dignity one day.
3. Greater healthcare costs
With longevity being the biggest risk facing women, they need to ensure they can afford good medical aid. There is a need to maintain healthier lifestyle habits, such as a proper diet, regular exercise, and preventative care. Health challenges are part and parcel of life – and one should always be able to afford good medical care, just in case.
Saving tips:
1. Start saving as soon as possible
It’s important to put money away from your very first payslip, as the sooner you start the better. Save more when you are able, particularly when you are young and have fewer responsibilities. The power of compound growth over time is too big to ignore – if you have not started saving yet, speak to a financial adviser to put a savings plan in place as soon as possible.
2. Make saving a priority
Have a positive attitude towards saving. When family finances become the main concern, women tend to save less to meet these demands and are therefore poorly prepared for retirement. Take an active role in your own financial planning. Don’t leave this up to your spouse or partner.
If you do want to save for something specific, set aside different buckets – you could have a travel bucket, or a new car bucket. If you allocate money to these buckets at the start of the month before you spend it, then you will be much more successful in achieving your goals.
3. Settle your debt
Try pay off your debts as fast as you can afford. It is normal to owe money on a car and house, but pay cash as far as you can and don’t live on credit. Live within your means.
4. Have an open discussion with your spouse
As women, we have a right to know what is going on with the family and household finances. Participate as a team and have healthy discussions about future savings and expenses. A spouse may need to reshuffle their personal finances to be able to support the whole family if there is going to be a break in service to raise children. It is vital that you don’t cash in retirement funds to support the family during this time. You will be taxed on amounts that you withdraw and will diminish your investments, which will be to your disadvantage in the years ahead.
5. For better or for worse: ageing single
Research suggests that women will outlive men. As widowhood commonly leads to loss of income, it may be an idea to take out life insurance on your spouse in the event of a death. Alexander Forbes financial advisers can assist you with comprehensive life cover that takes every financial need into account – including loss of income through disability, retirement, or the expense of taking care of critical illnesses.
6. Delay retirement
Don’t be tempted to retire early. Work for as long as possible, even if this means working when your spouse or partner has retired.
7.Understand investment types
If you have a long time until you retire, equities or shares can outperform cash type investments. Although cash is safe in the bank, the opportunity exists to beat inflation if you go into bonds, property or shares. The earlier the better, as compound growth over time is enormous.
8.Emergency savings
How do you plan for emergency savings? Unit trusts, or tax-free savings accounts where you can invest up to R3 000 a month, can be useful vehicles. Contingency plans are important and will lead to a better outcome later, because having emergency savings will prevent you from falling into debt and doing something you will regret later – like having to cash in your retirement savings.
