The good, the bad and the better

July 21, 2016

Women live longer than men, but they’re also more likely to reach retirement with less money. However there are plenty of things women can do now for a brighter financial future.

 

The good news

Living longer means women can reasonably look forward to spending 18 years in retirement, assuming they choose to exit the workforce at 65. Statistics New Zealand’s most recent figures show women can still expect to live 83.2 years, nearly four years longer than men, with a life expectancy of 79.5 years, at birth.

 

The bad news

Women tend to save less and have lower retirement balances than men, a pattern already visible in KiwiSaver which was only introduced in 2007.

Women’s average balance in the Mercer KiwiSaver scheme is $11,962 compared with $15,488 for men, a 23 per cent difference. However, it’s slightly better than 2012 when a Curtin University study reported men, on average, had 25 per cent more in their KiwiSaver account than women.

There are a number of reasons why women tend to save less; the Commission for Financial Literacy and Retirement Income NZ has identified 10 factors most likely to result in women having lower retirement savings than men.

The list includes:

- Pay inequalities:  women tend to earn less than men, New Zealand’s gender pay gap currently sits at 11.8 per cent, according to the Ministry for Women

- Career breaks: women take time out to have children or care for elderly relatives, so spend fewer years working

- Family structures – women are more likely to be lone parents and suffer more severe financial consequences when relationships end.

Women are also less likely to have detailed plans for growing their retirement savings; Mercer’s 2014 KiwiSaver Sentiment Index Study shows 21 per cent of men had given a lot of thought and made plans for retirement, while only 15 per cent of females have done the same.

 

Making it better

A little planning can make a big difference.

- Start early: the earlier you start saving, the better off you will be as you benefit from compounding investment returns over time.

- Make the most of free money: just $20 a week - $1042 a year – will net you $521 from the New Zealand Government. According to a Curtin University study most New Zealand women do not contribute enough to receive the full member tax credit; only 40 per cent receiving the full tax credit and 60 per cent receiving only a partial tax credit.

- Make bigger contributions early: contributing more in your 20s can help compensate for career breaks you might take in your 30s or 40s.

- Lump sums and catch ups: if you can't manage regular contributions, consider making lump-sum contributions when you have some spare cash. Alternatively, you can catch up by increasing your regular contributions when you return to work.

- Choose the right investment option: Don’t stick with the default – usually conservative – option; consider options appropriate to your goals and life stage.

 

You might also like: How can women catch up on saving?

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