Retirement: Women still at a disadvantage

Women at work are still at a disadvantage in terms of promotions and earnings, creating a long-term negative impact on their retirement. One reason for this is that women, statistically, simply live longer and must save more during their working lives. Added to this, women often do not contribute enough money to their retirement funds owing to less pay or being denied promotion, having to take a break in their career to raise a family or simply being a single parent with limited financial support.

The current Covid-19 pandemic led to several women losing their jobs, leading to yet another break in their savings. To make matters worse, women continuously experience a variety of related threats to their general well-being as they comprise roughly 70% of healthcare staff globally and experience an increase in domestic, sexual and gender-based violence at the same time.

A relevant question to emerge is how women can improve their financial position in retirement. The first and most important rule that can improve women’s income in retirement is signing up for a retirement fund as soon as they can. If you can do it from your very first paycheque, so much the better.

Build an emergency savings fund of more than six months’ income in addition to your retirement savings. To do this is tough, but if you can stick to it and save an amount equal to all your spending for a year on necessities such as food, housing, transport, and insurance, you should be able to handle tough times as proven by Covid-19.

Your employment-based retirement fund will most likely not give you the required income to replace your normal salary at retirement. This fact is largely ignored by most, but did you know you may increase your contributions to any employment-sponsored retirement fund or to a retirement annuity fund in order to achieve a more effective income at retirement (replacement ratio)?

Take advantage of tax benefits. You can contribute up to 27.5% of your taxable income (up to a maximum of R350 000 annually) and deduct this from your taxable income. Read more on this article: “Retirement: The best investment money can buy”.

A big mistake is using your retirement funds as a backup for a family business. Don’t do it. Just don’t. And never cash in your savings and transfer the money to the ownership of a partner.

When you take time off to raise a family, get your husband or partner to make contributions to your retirement fund. This will improve your retirement years and will be a lifesaver if you should get divorced. If this should happen, make sure you get your rightful share of your partner’s retirement savings.

Try to continue working for as long as possible before retiring.

Don’t wait too long. Start by investing your retirement savings in an appropriate and diversified growth strategy when you are young. Avoid get-rich-quick investments offerings and seek professional advice from a certified financial planner who is a member of the Financial Planning Institute of South Africa (FPI).

Once you are retired, structure your income so that it will meet your financial needs on a sustainable and ongoing basis. It is not always all about the income, but also about managing your expenses in retirement. Keep your spending in line by sticking to a budget within your means.

“The greatest risk in investments is your own behaviour” – Warren Buffet.

Please visit www.retirementplanning.co.za for more information on the books “The Ultimate Guide to retirement in South Africa” and “Secure your Retirement”, which was written by Wouter Fourie and his co-author, Bruce Cameron.