A gender pay gap exists in almost every country across the world, with the retirement income balance of women being 30% lower than men.
This is according to the World Economic Forum’s report, Living Longer, Better 2023.
Three important factors that contribute the most to gender disparities in retirement incomes include:
– women often earn less
– work differently
– live longer.
The 10X Retirement Reality Report 2023/24 shows that the retirement savings rate in South Africa stands are 0.5%, lagging behind other emerging markets, while only 6% of the SA population is on track to retire comfortably.
Janice Masencamp, head of Retirement Fund Consulting, NMG Benefits offers advice to women to better their retirement prospects and bridge the gap.
Prioritise long-term planning
Building a retirement fund should be a lifelong journey, according to Masencamp.
Starting to save for retirement early allows for more time for the savings to grow through compound interest.
Masencamp said that despite immediate financial pressures, it is vital to make saving for retirement a necessary part of your monthly budget.
Increase retirement contributions
Often, having insufficient retirement savings is a result of not saving enough while earning. The more you can contribute to your retirement fund, the larger your financial cushion will be when you can no longer work. Review your monthly budget to identify areas that you can redirect your money into additional contributions.
Engage in family financial planning
Instead of leaving the financial decisions to spouses or partners, women need to be active participants in all financial planning aspects.
This includes understanding household spending, savings, investments, and the status of retirement funds.
Understand the two-pot system
Masencamp said that women often prioritise family over career which can lead to higher chances of them having to dip into their retirement savings for emergencies.
With the new two-pot retirement system, South Africans can access up to a third of their retirement savings.
This may seem like a convenient way to get through tough times, however, withdrawing from your savings will reduce the funds available for growth and ultimately diminish your entire retirement amount.
Optimise for tax efficient
Retirement planning also involves structuring funds to minimise tax liabilities, according Masencamp.
Masencamp said that proper tax planning now can improve your long-term financial security, while diversifying income sources in retirement can help to decrease your future tax burden.
Speak to a financial adviser
A financial adviser can provide crucial insights and hone your savings planning by assessing your financial needs; helping you to set realistic goals; choosing suitable investments to ensure a secure retirement; and offering guidance on managing resources predictably and safely.
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