Asavela Gwele, Investment Consultant at 10X, discusses a few aspects of retirement saving that women might want to give a little extra thought to.
Women have increased longevity
On average, women live longer than men. According to StatsSA’s mid-year 2021 population estimates , life expectancy at birth is 59,3 for men and 64,6 for women. “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 Gwele. “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. Also, many more women than men are just not saving at all. According to the 10X South African Retirement Reality Report 2021 (RRR21) 54% of women say they don’t have a retirement savings plan, compared with 46% of men.
The RRR21 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 for 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 South African 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 RRR21, 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 proved 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, ie 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 and a beautiful thing,” 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: Be the boss of your own future.
“You might be juggling multiple roles … partner, mother, daughter and employee … but it is vitally important that you prioritise your own security too.”
She adds: “The RRR21 makes it clear that everyone (especially women) needs to have a defined retirement plan that is tailored to their individual circumstances.”
You can work out what you should be saving today by plugging some basic information into the retirement saving calculator on 10X's website. It will create a unique savings plan for you.
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)
