Women have a lot more to think about than pink tax when saving for retirement

While the principles underlying saving and investing are gender-neutral, the realities facing men and women can be very different, and that is especially true when it comes to planning for retirement. 

Here are a few aspects of retirement saving the fairer sex might want to give a little extra thought to:

Women live longer

On average, women live longer than men. According to Stats SA’s midyear population estimates for 2022, life expectancy at birth was 60 years for males and 65.6 years for females. 

“That difference of an additional five-and-a-bit years is mostly good news for the ‘fairer sex’, but it also has its downside,” says Asavela Gwele, investment consultant at 10X Investments. “Namely, that women’s retirement savings will be required to last longer on average.”

This need for more savings adds to the problem that women tend to have less saved for various reasons, including that they earn less on average and that their careers are often interrupted by family responsibilities. 

Also, many more women than men are just not saving at all. According to the 10X South African Retirement Reality Report 2021, 54% of women say they don’t have a retirement savings plan, compared with 46% of men.

This report is based on findings of the 2021 Brand Atlas Survey, which tracks the lifestyles of the universe of 15-million economically active South Africans (those living in households with a monthly income of more than R8,000). The report confirms that women continue to be less retirement-ready than men by many measures.

When including those who describe their retirement plan as “vague”, the number of women who are not preparing properly for retirement goes up to 77%. On the other side of the equation, only 5% of women said they were executing a well-considered retirement savings plan.

“If the generic guideline for retirement savers is to put away 15% of their income for 40 years, women should ideally target closer to 16.5%,” adds Gwele. “That way they set themselves up to avoid the common curse of SA women, who must so often depend on the kindness of others in their old age.”

Women tend to take fewer risks (as investors)

“Forgive the generalisation,” says Gwele, “but women are known to be more risk-averse than men, especially when it comes to finances.” 

She points to the 10X South African Retirement Reality Report 2021, which found that only 14% of women invested their money for growth, compared with 24% of men.

“Investing in equities has been shown to be the best way to grow your wealth. Leaving your money in a savings account or similar will erode its real value because the interest earned is often lower than the current inflation rate,” she says.

“A high equity portfolio has been shown to deliver the best returns over the long term. However, it is also the most volatile over the short term. You will need to keep your eyes fixed on your long-term horizon and ignore the ups and downs in the short term.”

Women make more sacrifices for family

“It’s no secret that women often devote themselves to caring for their partners, their children and, often, their parents too,” says Gwele. 

“Women are also more likely to have their career interrupted when starting a family. This interruption will often mean the opportunity to cash out their retirement savings too, which is one of the classic retirement savings mistakes.”

Cashing out savings means you are resetting your savings plan to zero, but you also lose out on the potential return on those savings. The return on those savings and the return on that return, that is compounded growth, is by far the bigger loss.

“When taking a career break, women should navigate decisions about cashing out their savings carefully. If in doubt, seek professional advice and, most importantly, do not feel pressured into making a hasty decision,” says Gwele. 

Women often defer to their male partners 

“Being a stay-at-home mom is a privilege,” says Gwele. “However, the flipside is that it can make a woman entirely dependent on their spouse [and their spouse’s saving habits].” 

Leaving important financial decisions, such as planning for retirement, entirely up to your spouse’s discretion makes you more vulnerable to financial distress down the line, especially in the event of disability, divorce or death.

“It may feel depressing to think about the possibility of such events, but one must be realistic,” says Gwele. “Also, sharing financial responsibility fosters a better sense of security and individual empowerment.”

Gwele’s message to women is: Take charge and be the boss of your own future. 

“You might be juggling multiple roles ... partner, mother, daughter, employee ... but it is vitally important that you prioritise your own security too.” 

As 10X’s annual Retirement Reality Report makes clear year after year, SA has a retirement savings crisis and women are in a significantly worse position than men. 

“Also, women tend to reject the best chance they have of closing this gap, which is to inform themselves and take charge of their own saving and investing journey.”

Gwele says it isn’t that complicated to get started. “Visit the 10X Investments website and use the simple, free calculators to custom-make a retirement savings plan for you. Or download one of the free e-books to start your saving journey. The first step is often the hardest one to take. Fortunately, the technology we have at our fingertips makes this a lot easier than it was for our mothers.”

Take charge of your financial future: register for 10X’s Women’s Month webinar

Gwele will be taking part in 10X’s Women’s Month webinar on August 25. She will be joined by Sonja de Bruyn, 10X’s chair, who is also the daughter of a leader of the 1956 Women’s March, as well as Ishani Khoosal-Kala, 10X’s corporate pensions dynamo.

They will talk about how financial empowerment is a vital aspect of freedom for women.

Click here to register to attend the webinar.

This article was paid for by 10X Investments.

^{The content herein is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice. 10X Investments is an authorised FSP (number 28250)}