In a world where financial equality and inclusion remain work in progress, one uncomfortable truth persists: women need to save more for retirement than men. Despite notable strides toward gender equality, the fact remains that women still face a unique set of financial challenges, many of which directly impact their ability to build long-term wealth and retire with financial security. Understanding these hurdles is essential not only for raising awareness but also for encouraging women to take control of their financial futures by developing strategies to ensure independence and prosperity in retirement.
The longevity factor
We all know that women live longer than men – with global health statistics indicating that the average woman lives approximately five to seven years longer than the average man. While increased longevity is great, it also means that women need a larger retirement egg to sustain themselves through their later years. A woman who retires at age 65 may need to fund for a retirement period of 25 to 30 years or more, which is a significant period of time to draw down from one’s savings. The reality is that a longer life expectancy equates to higher cumulative living expenses, higher medical costs, and a longer drawdown period of retirement savings, and these factors need to be built into one’s retirement plan.
Lower lifetime earnings
The gender pay gap persists both globally and in South Africa, even when taking experience, education and vocation into account. This means that over the course of a woman’s working life, she will typically earn – and consequently save and invest – less than her male counterparts. Significantly, the impact of lower earnings leads to reduced access to employer-sponsored retirement contributions, lower levels of group life and disability cover, reduced ability to invest meaningfully, and a diminished ability to benefit from compound growth over time.
Interrupted career paths
Many women take time off work or reduce their working hours to care for children or elderly family members. While these caregiving roles are essential to society – and often underappreciated – they can come at the cost of a woman’s financial security. Career interruptions can impact salary progression, hinder promotions, reduce retirement fund contributions, and disrupt investment momentum. These gaps in employment can also affect a woman’s confidence in re-entering the workforce or negotiating for better pay when she does.
Risk aversion in investing
Multiple studies have shown that, on average, women tend to invest more conservatively than men, and, while this cautious approach means that women generally make few impulsive decisions and invest more consistently, it can mean that women miss opportunities for long-term growth. A lower equity exposure throughout a woman’s investment journey may mean smaller portfolio returns over time, which, in turn, can significantly impact retirement readiness.
Divorce and widowhood
Statistics indicate that women are more likely to experience financial hardship following divorce or the death of a spouse, particularly if their husbands previously managed the household finances. Given that women generally outlive men, many are compelled to assume responsibility for their financial affairs later in life, often after becoming widowed or divorced. Interestingly, our experience shows that these women often excel in managing their finances, highlighting that they were more than capable of contributing meaningfully all along.
Many women, particularly those who have opted to stay at home to raise children and manage the household, often find themselves financially vulnerable in the event of divorce, though recent developments aim to strengthen women’s rights in this regard. A landmark Constitutional Court judgment in October 2023 established that spouses married out of community of property without accrual, irrespective of whether the marriage occurred before or after 1 November 1984, are entitled to seek a court-ordered redistribution of assets upon divorce or death. Consequently, courts are now empowered to evaluate both financial and non-financial contributions when determining an equitable redistribution, with Parliament actively working to amend legislation to reflect this significant advancement.
Maternity and medical costs
While medical schemes may cover a portion of maternity-related expenses, pregnancy, childbirth, and the accompanying lifestyle adjustments frequently impose a disproportionate financial strain on women. Even prior to the arrival of a baby, many women must reduce their working hours, take unpaid leave, or step away from their careers temporarily, significantly impacting their immediate earning potential and long-term career progression. Navigating South Africa’s Unemployment Insurance Fund (UIF) to claim maternity benefits can also be a frustrating and complex process for new mothers, involving administrative hurdles, delayed payments, and unclear eligibility criteria, often leaving women without crucial financial support when they need it most. After childbirth, women typically incur additional and often unforeseen childcare expenses, including childcare services, medical check-ups, vaccinations, and daily care essentials. These direct and indirect costs can significantly diminish their capacity to consistently contribute to long-term savings and investments, exacerbating existing financial inequalities.
Building financial independence: Strategies for women
Despite these challenges, women are well-positioned to take control of their financial future. By adopting deliberate, informed strategies, women can overcome many of the systemic and social barriers to financial independence. Here’s what to consider
1. Start early and invest consistently: The power of compound interest is most effective when time is on your side. Women should aim to start investing as early as possible, even in small amounts. Regular monthly contributions to a retirement fund, tax-free savings account, or discretionary investment can help build momentum and long-term wealth.
2. Prioritise financial education: A strong foundation in financial literacy equips women with the knowledge and confidence to make informed decisions. Understanding key concepts such as risk, diversification, asset allocation, and tax efficiency empowers women to engage actively in their financial planning and ask the right questions when working with advisors.
3. Take an active role in retirement planning: Regardless of marital status, every woman should have her retirement plan. This includes understanding how much she will need in retirement, how her current savings align with this goal, and what adjustments are required to stay on track. Women should also familiarise themselves with their partner’s retirement strategy and ensure they are financially protected in the event of death or divorce.
4. Invest for growth: While being cautious with money can help avoid losses, being overly conservative can prevent wealth accumulation. Women should embrace an appropriate level of investment risk, especially in the early stages of their careers when they have time to ride out market volatility. A well-diversified portfolio with suitable equity exposure can provide the growth needed to beat inflation and fund a long retirement.
5. Protect your income: Women should consider income protection policies, especially if they are the primary or sole earner in a household. These policies provide a financial safety net in the event of illness or disability. Similarly, having adequate life and severe illness cover ensures that dependants are not left vulnerable.
6. Plan for independence: Finally, women should focus on building wealth that is independent of their partner’s. This includes having personal investments, a separate emergency fund, and a clear understanding of their legal and financial rights in marriage or cohabitation. Financial independence allows women to make decisions based on their goals and values, not out of financial necessity.
The reality that women need to save more for retirement than men is not just a product of income disparities but a reflection of a wider financial system that often fails to accommodate the life paths of women. However, with intentional action, sound planning, and a proactive approach to investing, women can overcome these disadvantages. Financial independence is not only possible—it is essential. By acknowledging the hurdles and implementing practical strategies, women can ensure a dignified and secure retirement on their own terms.
Have a fabulous day.
Sue
