Women are less ready for retirement. Here’s how to close the gap

How ready are you for retirement? Whatever your answer is, there’s a good chance it’s less ready than the average man. Unfortunately, there’s a retirement readiness gap between the sexes. Here’s why, and what you can do to close it.

It’s common knowledge that South Africans, both men and women at all levels of income, are poor at planning for retirement. According to estimates by the National Treasury, only 6% of South Africans have planned enough to ensure a comfortable retirement. And within the small group of people who feel prepared, women lag.

“According to a study called Perceptions of Retirement Adequacy: Evidence from South Africa, employment inequalities can result in females being less confident about retirement adequacy than males,” says Jennifer Arendse, Head of Marketing at Discovery Invest. “Having a thought-out and tailored investment plan for retirement is a priority that South African women can’t afford to ignore.”

It’s noteworthy that this gender retirement gap is not exclusive to South Africa, but is a global phenomenon. But why does it exist in the first place? There are a number of nuanced and correlating reasons. Here are the two main ones:

Why there’s a gender retirement gap

  1. Women generally earn less than men, so have less to save for retirement - On average, women earn less than males across all educational levels. According to the latest data from StatsSA, South African females with no education earned 54,4% of the income earned by their male counterparts, while females with high school or tertiary educations earned 68,2% and 63,1%, respectively, of their male counterparts average income. Women are also more likely to take leave to care for an ailing family member, Arendse adds. While these are vital and valuable contributions towards the wellbeing of her family, it’s estimated that such ‘interruptions’ amount to 10 fewer years in the workforce, and so 10 fewer years of potential retirement savings from the loss of income.
  2. Women generally live longer than men do, so need more in total to retire - The retirement gap is made tougher by the fact that women in countries with established socio-economic order live on average four to seven years longer than men do. Since they have a higher life expectancy at retirement age, they need a relatively bigger stash of retirement savings than their male counterparts.

5 steps to close the retirement readiness gap

According to Joseph Thompson, Co-founder and CEO, Aid: Tech, 55% of the unbanked population in the world (that is, those who have no access to financial products) are women.

“Everyone wants financial security when they stop working – and for most women, that means taking steps to plan more deliberately, and without delay,” says Arendse. Here are her five steps for women to help them better prepare for retirement:

  1. Own your financial future: It’s easy to rely on partners, parents or even children to ‘sort out the admin’, but every woman needs to take ownership of her own financial future. Too many women don’t engage because they are “terrified of getting it wrong,” notes Ann Wilson, the Wealth Chef, but these days, there is plenty of high-quality information available, as well as handy retirement planning tools to help you make informed decisions. It all starts with making your finances a personal priority and taking steps to become more informed.
  2. Get professional advice: Researching and even completing a financial education course are great steps to take for general education, but a certified financial planner can help tailor a financial plan for your specific circumstances, taking your needs and family into account. It’s also great to have someone you can count on for objective money advice. This can help you avoid common and costly financial errors (like cashing out your retirement savings instead of preserving them when you change jobs).
  3. Start saving and investing – earlier and more: “Industry reports reveal that significantly fewer women save and invest than men,” says Arendse. “To reverse the downward trend and beat inflation, women need to start investing more, over a longer term. This is what’s needed to generate enough income to live off in retirement.”
  4. Look after your health. It makes sense that what’s good for your health is also good for your wealth. By following a healthier lifestyle, like exercising regularly, eating nutritious food, and reducing tobacco and alcohol use, you can manage and even prevent lifestyle-related diseases like cardiovascular disease, cancer, chronic respiratory disease, and diabetes. Over time, good health can save you thousands in medical expenses and increase your productivity, boosting your discretionary savings. This is clear from Discovery Vitality’s data, which shows that, when compared to non-Vitality members, highly engaged Vitality members have an almost 60% lower risk of death, 14% lower healthcare costs, and are 99% less likely to be in arrears.
  5. Invest for growth: Arendse also notes that “although women tend to save more in cash, they are much less likely to invest their money for growth.” She stresses that investing in “a well-diversified, high-equity portfolio is the most effective and reliable way to grow your capital over the long term – so it’s worth doing what it takes to optimise your returns. This is what will help women achieve financial independence and close the retirement readiness gap.”