Here are some sobering statistics about women and why they need to start saving for their own retirement:
- Two of every five marriages end in divorce before the 10th anniversary;
- The mean age of a divorced woman is 44;
- Women outlive men by 4.4 years;
- Women earn 27% less than men as a result of the gender pay gap; at more senior levels, women earn 39% less;
- One in every two families is headed by a single mother, and only 16% receive financial support from the father;
- Working women are more likely to be caught in the sandwich generation – looking after their children as well as their parents.
This rather shocking reality places women at a serious disadvantage when it comes to retirement. They are living longer than men, earning less, and are poorly prepared for the retirement years. This in turn means they are likely to end up working well past retirement age.
Faeeza Khan, legal marketing specialist at Liberty, points out that the financial pressures on working women due to the burden of raising children and, in many cases, looking after their parents, leaves little left over for retirement saving.
“As a result, you find many women entering their 40s with absolutely no savings whatsoever,” she says. “In this day and age, they are increasingly likely to be divorced, and receive no financial support from the ex-husband.”
Women in the modern era are far more likely to get divorced than their parents’ generation. They may have access to a portion of their ex-husband’s retirement fund at the time of divorce – but according to Khan, instead of preserving these savings, many spend the funds by putting down a deposit on a house or paying off the car.
From a legal point of view, the most common type of marriage contracts are in or out of community of property with accrual, meaning the wealth accrued from the date of marriage is shared equally on divorce.
Both allow the divorced woman to share equally in the wealth accrued during the marriage. Khan says it is important for women to preserve their portion of the ex-husband’s retirement savings in the event of divorce, and avoid using this as a cash windfall to be spent on anything other than retirement savings.
The best option however, is to save 15% of your net salary, starting with your very first pay cheque, adds Khan, and to maintain this at 15% as your salary increases. “It’s important to never touch these savings for emergencies, which will always pop up. This is what we mean by paying yourself first. You put your 15% savings away before you pay rent, car or groceries. Once you start to do this and see your savings grow, it becomes natural and easy to do.”
What if you have no savings at all and nothing left at the end of the month to save?
“Then you are living beyond your means,” says Khan, “and have to do one of two things: bring your expenses under control, or look for an additional source of income, maybe a little side business, such as baking or catering, to supplement your income.”
The idea of ‘retirement savings’ is often looked upon with dread by women, since it conjures images of old age and decrepitude. But consulting a financial adviser is an opportunity to redefine your life’s goals, and rekindle those dreams that have been held at bay while bringing up the kids and working on a career. Perhaps you still want to climb Kilimanjaro, or attend the next Soccer World Cup in Qatar.
“Everyone should have goals like this, since these are the rewards for working hard and saving – which is really foregoing pleasure now to enjoy at some future time,” says Khan. “If going to the Qatar World Cup excites you, then you have roughly four years to plan and save for this. Woman should find a financial adviser who can help them achieve these goals and monitor their savings progress through the various stages of their careers.”
It is vital to start developing the habit of saving, she adds. “Many women say they cannot afford to save 15% a month. This is usually not true. It is other things they cannot afford. They are living day-to-day with no regard for the future. There are lots of products available to them to assist in developing the culture of saving.”
Brought to you by Liberty.
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