Women live longer – need to save more for retirement
13 Aug 10
A press release from Old Mutual points out that while savings habits amongst
women in South Africa have improved dramatically over the past couple of years,
latest statistics show that there are still major concerns when it comes to
retirement planning for women.
According to the results of the recent Old Mutual Retirement Monitor survey 2010, when asked what they were currently saving for, only 47% of women respondents answered: ‘retirement’. The survey also revealed that merely 6% of women said that they make additional contributions to their retirement funds over and above their regular monthly amounts, compared to 13% of men.
Another worrying statistic is that 59% of women admitted to taking all or some of their company retirement funds out as cash when leaving their jobs, compared to 49% of men. This is compounded by the higher likelihood of career interruptions experienced by women as a result of starting a family.
According to Seelan Gobalsamy, Managing Director of Old Mutual Corporate, it is estimated that employees need to contribute a minimum of 15% (including the employer contribution) over an uninterrupted period of 40 years if they want to have any chance of ensuring that they will have sufficient savings at retirement to maintain their standard of living.
He says that a woman who stops her monthly retirement fund contributions as a result of taking two years off (i.e. to start a family) between the ages of 30 and 32, will have about 10% less at retirement than a woman without career interruptions. This is due to less contributions being made to retirement savings, as well as losing out on potential salary increases.
Gobalsamy states that the challenge becomes even greater if you spend your retirement fund withdrawal benefit when you change jobs. “Having to start saving again for retirement at age 32, can cut another 35% off your retirement benefit. In this example, stopping your career for two years and spending your withdrawal benefit can reduce your retirement benefit with up to 42%,” he says.
“This is particularly worrying as women tend to outlive men and thus actually need to save more for their retirement during their working lifetimes.”
Gobalsamy says while these are certainly worrying statistics, it is possible to retire comfortably by working with your financial adviser who can craft a realistic, personalised savings plan that will guide you towards reaching your goals.
He recommends the following tips.
1. Start early. When it comes to retirement savings, the power of compound interest means that the earlier you start, the more time there is for your money to grow. Even small regular contributions made early in your working life can make a huge difference to your savings at retirement.
2. Reassess your situation on a regular basis. Life is unpredictable and changes to your personal situation can have a significant effect on your financial preparedness for retirement. Divorce, children and health issues are just some of the factors that could require an adjustment in retirement planning.
3. Understand your retirement fund. Unfortunately, most people do not take the time to get acquainted with their retirement fund. It is crucial that you understand where your fund is invested, whether it is in the correct portfolio to ensure maximum growth, who the trustees of the fund are, how much life and disability cover is provided and how your monthly contributions are allocated.
4. Get advice from the professionals. Part of the job of a retirement fund trustee is communicating with members. If there is anything you are unsure of when it comes to your company retirement fund, contact one of them. It is also important to speak to an experienced and accredited financial advisor, who can assess your overall financial situation, including your retirement savings position.
5. Take responsibility for your retirement savings. As with most things in life, it is ultimately up to you to take responsibility for your retirement savings in order to ensure you are able to live out your golden years in comfort. This means arming yourself with as much knowledge as possible and taking action when required. Contribute as much as you possibly can today to ensure a better tomorrow.
