Did you know that women are likely to retire with a much smaller nest egg than men? If you’ve spent decades working hard at your job and at home, that’s pretty discouraging news. So, what can you do to beat the retirement gender gap?
“I must say I hate money, but it’s the lack of it that I hate most,” said Kiwi writer Katherine Mansfield when she was at her most cash-strapped.
Mansfield’s attitude will strike a chord with many women – especially when we discover we’re statistically likely to reach retirement with less money than men.
It’s not that we aren’t thinking ahead: women are slightly more likely than men to have a KiwiSaver account.
But the odds are stacked against women being able to salt away as much money as men by the time they leave the workforce.
That’s because, generally speaking, women:
- earn less than men (the gender pay gap is currently 9%)
- take years out of the workforce to care for children
- are more likely to be single parents
- live longer, so have more years of retirement to fund.
And while women may be more likely to have a KiwiSaver account, men still tend to do better when it comes to KiwiSaver benefits. With generally lower wages, women get less in employer contributions than men, and by taking more time out of work for family reasons, they generally make fewer contributions from their pay to their KiwiSaver accounts as well. Both of which mean women benefit less from compounding returns and accruing interest than men too.
And of the 8% of Kiwis who have an investment with a superannuation scheme that isn’t KiwiSaver, women’s accounts have a median value of $42,000 – while men’s are valued at $69,000.
So, it’s no surprise that research has found women are less confident than men that they’ll reach their retirement goals.
There are changes ahead: Prime Minister Jacinda Ardern has set a target of achieving equal pay for women in public service jobs within four years. But women still have an uphill battle saving for their retirement.
So how can women overcome the retirement gender gap?
Following these three common-sense tips can help you on the path to a happier retirement
1. Think long-term
Research suggests women are great at day-to-day budgeting – keeping tabs on the supermarket bill, buying those new shoes only when they’re on special, saving in advance for Christmas – but not so great at long-term financial planning.
Thinking about the cost of retirement may seem scary, but knowing your goals and having an action plan will give you more control over the future.
You don’t have to worry about what your friends or family are doing or not doing: just think about the small, achievable changes you can make now that might give you a better retirement.
If you need a hand with your planning, we have an online tool that could help. It gives you a simple, easy way to work out what kind of lifestyle you could have in retirement and how your KiwiSaver account could help you to achieve it.
2. Balance risks with returns
Financial commentators often point to research showing women are less willing than men to take risks with their money.
But a new study suggests women and men have similar attitudes towards investment but women are more likely to play it safe because life events such as childbirth and care-giving make their year-to-year incomes harder to predict.
So, an important question to ask yourself is: what level of risk is right for your stage of life?
If you have a KiwiSaver account, different investment funds offer different levels of risk, so making sure you’re in the right one for your needs is important. Investment funds usually fall into one of three main categories - conservative, balanced or growth - ranging from lower to higher risk. You’ll need to decide which one is right for you.
Default investment funds are usually conservative, which means they generally offer lower risk but smaller returns.
If you have more time, you can consider taking on more risk. That’s because you may have time to make up your losses and to benefit from compound returns.
Whatever you decide, it’s smart to review your chosen investment fund regularly to make sure it’s still right for your age, stage and preferred level of risk.
3. Protect your property
Ending a relationship can be hard – on your pocket as well as your heart.
To protect what you have, it may be worth getting financial advice about your options.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any investment decisions.
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