Women need to save more than men for re­tire­ment

Saturday Star - - FILM - STAFF RE­PORTER

MAR­RIED women still rely to a large ex­tent on their hus­bands to en­sure their re­tire­ment will be com­fort­able, but for women who want to be fi­nan­cially in­de­pen­dent of their spouse or who face re­tire­ment without a part­ner to sup­port them fi­nan­cially, the bar­ri­ers to sav­ing enough are for­mi­da­ble.

Women face sig­nif­i­cant hur­dles to sav­ing enough to en­able them to main­tain the same stan­dard of liv­ing in re­tire­ment as men:

• They earn less, on av­er­age, than men;

• On av­er­age, they out­live men by up to five years, which means their re­tire­ment cap­i­tal needs to last for longer; and

• Women often put their ca­reers on hold for a num­ber of years to have and raise chil­dren with the re­sult they usu­ally have less time in which to ac­cu­mu­late their re­tire­ment sav­ings.

Niel Fourie, the pub­lic pol­icy ac­tu­ary at the Ac­tu­ar­ial So­ci­ety of South Africa, says that, if a man and a woman re­tire at the same time with a com­pa­ra­ble amount of re­tire­ment cap­i­tal and sim­i­lar in­come needs, the woman runs a greater risk of out­liv­ing her money.

“This means that a fi­nan­cially in­de­pen­dent woman will need to ac­cu­mu­late more re­tire­ment cap­i­tal dur­ing her work­ing years than a man in or­der to se­cure the same level of re­tire­ment in­come for life,” Fourie says.

CLOSER TO 20%

A rule of thumb says that the av­er­age per­son should be con­tribut­ing at least 15% of his or her be­fore-tax earn­ings to­wards re­tire­ment sav­ings. Fourie says al­though this may be true for men, a fi­nan­cially in­de­pen­dent woman should be in­vest­ing closer to 20% of her pre-tax in­come to se­cure enough re­tire­ment­fund­ing cap­i­tal.

Say a man and a woman each earn R20 000 a month be­fore tax. The man would need to put away R3 000 a month to­wards re­tire­ment, but the woman would have to in­vest closer to R4 000 every month to have the same amount of in­come in her re­tire­ment years, Fourie says.

Not only do women have to in­vest more than men to achieve a fi­nan­cially se­cure re­tire­ment, they usu­ally also have less time in which to achieve this.

Let’s look at Jane’s sit­u­a­tion. She starts in­vest­ing for her re­tire­ment at age 25.

Her goal is to have an in­come that en­ables her to main­tain her stan­dard of liv­ing, which in­creases with in­fla­tion in re­tire­ment.

Her fi­nan­cial ad­viser tells her she can achieve this if she con­trib­utes 20% of her be­fore-tax in­come to a re­tire­ment fund. She fol­lows this ad­vice, but from age 30 to 35 Jane takes some time off to raise a fam­ily.

Luck­ily, Jane did not cash in her re­tire­ment sav­ings, but, when she re­turns to work af­ter five years, her ad­viser tells her that she now needs to con­trib­ute 25% of her earn­ings to make up for lost time and cap­i­tal.

If Jane had dipped into her re­tire­ment cap­i­tal, the sit­u­a­tion would have been even worse: she would have had to in­vest closer to 30% of her salary.

Fourie says as tempt­ing as it may be to cash in on your re­tire­ment sav­ings when you take a break from your ca­reer, it is not worth it. “De­pend­ing on your cir­cum­stances, you may never catch up. And to make it worse, you lose out on the ben­e­fits of com­pound­ing, which is the growth achieved on your orig­i­nal in­vest­ment plus the growth on the re­turns al­ready earned.”

SOUND AD­VICE

Fourie has the fol­low­ing ad­vice for women who want to be fi­nan­cially in­de­pen­dent in their re­tire­ment years:

• Save and in­vest in­de­pen­dently of your spouse or life part­ner.

• Wher­ever pos­si­ble, don’t ac­cess your re­tire­ment sav­ings when you take time off to raise your fam­ily.

• If you are younger than your part­ner and you are hop­ing to re­tire at the same time, make sure you fac­tor this into your in­vest­ment plan­ning.

• If you can­not af­ford to re­tire com­pletely, scale down your work­ing hours rather than ex­it­ing your ca­reer com­pletely. Push­ing out your re­tire­ment date can help you to in­crease your re­tire­ment cap­i­tal sig­nif­i­cantly.

• Take an active in­ter­est in your fi­nances and en­sure that you par­tic­i­pate in im­por­tant de­ci­sions such as sav­ing for your re­tire­ment.

• Plan ahead and con­sider what would hap­pen if your life part­ner dies, be­comes dis­abled or ends the re­la­tion­ship. Does your an­tenup­tial con­tract give you the right to claim a por­tion of his re­tire­ment cap­i­tal if you get di­vorced? Will it be enough to fund your re­tire­ment? THE FI­NAN­CIAL Sec­tor Con­duct Author­ity (FSCA) has warned against deal­ing with a fi­nan­cial com­pany called Metro Fi­nance.

The FSCA says it has re­ceived in­for­ma­tion that Metro Fi­nance is of­fer­ing var­i­ous types of loans to the pub­lic, on the in­ter­net, tele­phon­i­cally and via email.

Ap­par­ently, the com­pany pur­ports to be linked to Majestic Fi­nan­cial Ser­vices, a reg­is­tered fi­nan­cial ser­vices provider.

Majestic Fi­nan­cial Ser­vices has con­firmed that it is not in­volved or af­fil­i­ated with Metro Fi­nance, which is not au­tho­rised in terms of the Fi­nan­cial Ad­vi­sory and In­ter­me­di­ary Ser­vices Act to pro­vide fi­nan­cial ad­vice or in­ter­me­di­ary ser­vices.

The FSCA re­minds you that, if you in­tend us­ing a fi­nan­cial ser­vices com­pany, you check be­fore­hand with the FSCA on ei­ther 0800 110 443 or www.fsca. co.za whether the com­pany is au­tho­rised to ren­der such ser­vices. – Staff Re­porter

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