How women can secure their retirement

Women tend to live longer than men, but there are significant obstacles in the way of their accumulating sufficient retirement savings. Georgina Crouth looks at these obstacles and what women should be doing to safeguard their retirement.

WHY do men die first? Because they want to. As grating as that hoary, sexist adage is, women do, on average, outlive men by more than five years. The science behind why they have longer life expectancies is inconclusive, although a five-year advantage over men does have some downsides.

One of the biggest drawbacks is that women need to sustain themselves financially, so more resources must be devoted to retirement, from an early age.

Fran Troskie, an investment research analyst at RisCura, says women’s retirement savings need to last them at least five years longer, so they need to save more.

“It’s an important message that doesn’t seem to have hit home yet: women need to save more for retirement than men do,” Troskie says. “(This) usually also means they need to start saving at higher contribution rates.”

And yet women are still earning significantly less than men. Troskie says there’s a notable difference in incomes between men and women.

“The 2017 Pulse of the People report run by market research firm Ipsos found that women in South Africa earn 27% less than their male counterparts. The gender pay gap is even wider among top earners, where men earn as much as 39% more than women at the same level. In addition, child-rearing activities can erode the lifetime-earnings and savings potential of women.”

Women also shoulder more domestic and childcare responsibilities. Statistics SA’s latest figures, released on August 1, show that unemployment rates are higher for women than men (40% compared with 33%) and women spend more than twice as much time on household maintenance and care-giving activities. They also take more time off to do so.

“In other words, relative to their male peers, women have less time available to earn what is already less money,” Troskie says.

Natalie Wood, a senior wealth specialist at Warwick Financial Services, agrees: women must take charge of their financial destiny. “They need to implement strategies catered to possible long-term needs, for example, the financial well-being of the family, should their spouses die.

“These strategies could potentially include continue working, independently saving towards retirement at a reasonable percentage of contribution (in line or above inflation), or ensuring the spouse has a life policy that would ensure any potential liabilities are settled upon their passing.”

Since women are likely to spend more time in retirement, they need more retirement income than men; they need to build this while earning less and they have less time to accumulate savings.

How can women safeguard their futures?

Twané Wessels, a product actuary at Just, says: “It is crucial that we as women empower ourselves and not plead ignorance. Financial vulnerability is one of the greatest challenges women face today. Women experience various types of gender bias throughout their working life that result in them saving less for retirement than their male counterparts. And not only are women saving less – if they outlive their spouse or get divorced, they could face being left destitute in retirement and becoming a financial burden on their families or the state.”

Wessels says recent independent research commissioned by Just, in which South Africans aged between 55 and 85 in major metropoles were interviewed, found that women were not aware that they could outlive men. When men and women were asked what age they thought they would live to, men said 83 on average and women said 79, on average.

The survey also found that 65% of women say the main reasons for not planning financially for retirement are that they will do it closer to retirement and that they are not sure how to do it.

“Alarm bells should ring, because in addition to needing more money for living longer and leaving financial planning for retirement too late, women have less time and income to accumulate sufficient savings,” she warns.

“Women typically marry husbands who are three to four years older than themselves. It is the last survivor, in most cases the widow, who will suffer the indignity of being unable to fund their basic living costs in their final six to eight years of life if they don’t prepare adequately. Don’t assume your spouse is making the right provision for a sustainable lifetime income that will be sufficient for both of you.”

Wood advises that women start their own retirement account, learn the jargon of the financial world, and have a financial adviser at hand to guide them through the journey of planning for retirement.

She says they should invest a portion of their savings in longterm growth assets such as shares that earn inflation-beating returns.

Women need to put their retirement savings first – even before some of the needs of their children. “Ensure that you are the primary beneficiary on your spouse’s retirement annuity and life policy.”

Ultimately, women need to take care of themselves. And it starts with making better choices, says Wessels. “Saving money is the definition of delayed gratification. It is challenging, but worth it.

“If, instead of spending R400 per month at a nail bar from the age of 25, you save the money (let’s conservatively assume in a money market fund), it will amount to R1.3 million when you reach 65. Based on current annuity rates, this would purchase a lifetime income of R8 200 a month that would aim to keep track with inflation.”

georgina.crouth@inl.co.za