Married women still rely to a large extent on their husbands to ensure their retirement will be comfortable, but for women who want to be financially independent of their spouse or who face retirement without a partner to support them financially, the barriers to saving enough are formidable.

Women face significant hurdles to saving enough to enable them to maintain the same standard of living in retirement as men:

  • They earn less, on average, than men;
  • On average, they outlive men by up to five years, which means their retirement capital needs to last for longer; and
  • Women often put their careers on hold for a number of years to have and raise children with the result they usually have less time in which to accumulate their retirement savings.

Niel Fourie, the public policy actuary at the Actuarial Society of South Africa, says that, if a man and a woman retire at the same time with a comparable amount of retirement capital and similar income needs, the woman runs a greater risk of outliving her money.

“This means that a financially independent woman will need to accumulate more retirement capital during her working years than a man in order to secure the same level of retirement income for life,” Fourie says.

A rule of thumb says that the average person should be contributing at least 15% of his or her before-tax earnings towards retirement savings. Fourie says although this may be true for men, a financially independent woman should be investing closer to 20% of her pre-tax income to secure enough retirement-funding capital.

Say a man and a woman each earn R20 000 a month before tax. The man would need to put away R3 000 a month towards retirement, but the woman would have to invest closer to R4 000 every month to have the same amount of income in her retirement years, Fourie says.

Not only do women have to invest more than men to achieve a financially secure retirement, they usually also have less time in which to achieve this.

Let’s look at Jane’s situation. She starts investing for her retirement at age 25.

Her goal is to have an income that enables her to maintain her standard of living, which increases with inflation in retirement.

Her financial adviser tells her she can achieve this if she contributes 20% of her before-tax income to a retirement fund. She follows this advice, but from age 30 to 35 Jane takes some time off to raise a family. 

Luckily, Jane did not cash in her retirement savings, but, when she returns to work after five years, her adviser tells her that she now needs to contribute 25% of her earnings to make up for lost time and capital. 

If Jane had dipped into her retirement capital, the situation would have been even worse: she would have had to invest closer to 30% of her salary.

Fourie says as tempting as it may be to cash in on your retirement savings when you take a break from your career, it is not worth it. “Depending on your circumstances, you may never catch up. And to make it worse, you lose out on the benefits of compounding, which is the growth achieved on your original investment plus the growth on the returns already earned.”

Sound advice

Fourie has the following advice for women who want to be financially independent in their retirement years:

  • Save and invest independently of your spouse or life partner.
  • Wherever possible, don’t access your retirement savings when you take time off to raise your family.
  • If you are younger than your partner and you are hoping to retire at the same time, make sure you factor this into your investment planning.
  • If you cannot afford to retire completely, scale down your working hours rather than exiting your career completely. Pushing out your retirement date can help you to increase your retirement capital significantly.
  • Take an active interest in your finances and ensure that you participate in important decisions such as saving for your retirement.
  • Plan ahead and consider what would happen if your life partner dies, becomes disabled or ends the relationship. Does your antenuptial contract give you the right to claim a portion of his retirement capital if you get divorced? Will it be enough to fund your retirement?