Financial health: Why women struggle to save for retirement

A recent survey found that when it comes to South African women’s financial health, not much has changed over the years and they remain worse off than men.

Women need to save differently for retirement, and this is especially true in South Africa with its vast socioeconomic and historical disparities.  A recent retirement report that surveyed 15.4 million South Africans, found that women bear the brunt of not being able to save into their retirement years.

Factors such as longevity, the widening pay gap, the investing gap, and caregiving requirements can lead to having less available savings for retirement.

Statistics SA research shows South Africa has a high percentage (42.2%) of female-headed households.

Women continue to bear the brunt of South Africa’s disturbingly high unemployment statistics, with an official unemployment rate of 35.7% compared to men’s 30%, according to Statistics SA’s Quarterly Labour Force Survey (QLFS) for Q2 2023.

While many women continue to struggle to manage their finances on a day-to-day basis, even fewer can begin to start planning for their future retirement.

The 10X Investments’ Retirement Reality Report 2024 found that only 6% of South Africans have saved enough for a sustainable retirement.

Gender wage gap

While the gender wage gap has narrowed over the past few decades, one of the primary reasons women have fewer retirement savings than men is due to lower lifetime earnings.

Gender parity ratios in monthly income earnings are skewed towards men: for every 10 male workers earning above R11 500 a month, there are 6 women in the same income bracket.

A large proportion of South Africa’s children (44.1%) live with their mothers. A third (32.7%) live with both parents; 19.5% live with neither of their parents; and 3.7% live with their fathers.

Laws forbidding discrimination against women in the workplace may slowly be narrowing the career opportunities and pay gaps between the sexes, but there is still a long way to go. Pregnancy and childrearing set a woman’s career back even further financially, especially when it comes to retirement. Women often must pay the brunt of the caregiving costs, especially for single mothers in South Africa. To top it all, women can expect to live five years longer, on average, than men.

Planning for retirement

Over the years, women have consistently rated lower than men in most metrics concerning financial well-being and retirement planning.

Half (49%) of all female respondents to the survey indicated that they do not have a retirement plan, compared with 43% of men. More than double (11% versus 5%) the number of men than women said they were diligently following a well-conceived retirement plan.

Although a prudent, cautious approach to investing is admirable, it may ultimately be to women’s detriment, as only higher-risk investments, such as listed equities, can deliver inflation-beating growth over the long term.

A further 2% of people who had saved for retirement indicated that they had already run out of savings, meaning they were relying either on family or state support. Men were generally less unsure and more confident than women about the state of their finances.

More startling is that, despite women facing higher financial challenges, more women than men do not save or invest at all. Of those that do, women are more concerned with protecting their wealth than growing it.

The 10X Retirement Reality Report found that more women than men are ‘savers’ (30% of women versus 26% of men), while the reverse is true for ‘investors’ (24% of men versus 14% of women). This cautious, prudent approach is admirable, but it fails to recognise the destructive power of inflation.

Returns on savings in the bank rarely match the inflation rate, let alone beat it. Only investments in growth assets, such as listed shares (equities), can deliver inflation-beating growth over the long term.

It is important to strike a balance between saving for short-term goals and investing for long-term goals. The respondents who indicated that they ‘save and invest in equal measure’ recognise this distinction.

Unfortunately, they made up only 15% of men and 11% of women, pointing to a deficiency in financial knowledge, more so among women.

Start small, but start early

In conclusion, the difference between what South African women expect their retirement to look like and the realities faced by those in retirement and approaching it, cannot be underestimated.

Having the right knowledge and information is key to closing the expectation-reality gap. In their long-term interests, women need to equip themselves to be better informed on the importance of saving, the power of compound interest, the consequences of not saving, the additional disadvantages that women need to overcome, and the impact of costs.

Starting small and as early as possible is the only way to address this balance.

*This article was written by Caroline Naylor-Renn, COO for 10X Investments, based in Cape Town. She is passionate about educating women to develop strategies to ensure their financial freedom.

Caroline Naylor-Renn COO for 10X Investments.


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