Conventional wisdom is that women live longer than men – an average of five years longer! The reasons have caused much dinner-table debate, and some ribaldry. But despite the fact that females will outlast their male counterparts, workplace dynamics have not yet caught up with this fact.
The gender pay-gap is a hornets’ nest in itself. Various pieces of South African legislation are aimed at preventing gender discrimination in the workplace. South Africa is ranked first in the Africa Gender Equality Index, and globally it is ranked 19th among 149 countries. This seems pretty good, right? But the devil is in the details: when it comes to wages, there is a wide disparity in what men and women earn. According to the latest research by the University of Stellenbosch, the gender pay-gap has remained stagnant at a median of between 23% and 35%. Women earn far less than men.
Moreover, studies show that in South Africa, women-headed households (which constitute about 38% of the survey) are about 40% poorer than those headed by men. More troubling, 48% of female-headed households support extended family, more than double the percentage of male-headed households who do the same. Women also contribute to the family and society in a number of other ways that are not necessarily expected from their male counterparts. Women still shoulder most of the responsibility when it comes to child-rearing and household management, according to the latest Time Use Surveys by Stats SA. Women who choose to have children, also often require some time off for maternity leave. Most women report that they need to take significant time off to take care of these responsibilities.
A woman’s various responsibilities, split as they are between paid work and (unpaid) “house” work, means that her availability for office-based work is potentially further curtailed.
So not only do women usually receive less in earnings, they also usually have less time available to devote to earning.
Let’s look at an example. Letshego takes five months off when she is 28 to have her first and only child. When she turns 40, her elderly mother falls ill and needs home-based care for two months. At the age of 50, her mother passes away, and she returns home to her family to mourn and take care of the funeral arrangements. During her 40-year working life, assuming she will retire at 65, she has spent eight months out of the workplace. Let us also assume that during those months, she wasn’t being remunerated and she therefore was not contributing to her retirement. If she plans to purchase an annuity when she retires, and if her contribution rate is 15% of her salary (which is already at the higher end of the contribution range), her retirement income is reduced by 3%. In cold hard cash: If she had been used to living off R10 000 per month, she now only has R 9 700.
This may not seem too significant, but in a country such as South Africa, with its high incidence of poverty, R 300 is a considerable sum of money. And this shortfall can lead to financially irresponsible or even risky behaviour. Women may resort to overextending themselves with credit providers, compromising their credit profile and their ability to gain access to funding in times of extreme emergency. Or they may even turn to loan sharks/umbolekisi, who will use unscrupulous and dangerous methods to recoup their cash. This leaves women extremely vulnerable.
The key takeaway is: If a woman lives an average of five years longer, and retires at the same age as a man, she spends a longer time in retirement and therefore needs to accumulate more savings. She needs to accumulate this at a faster rate, as she is likely to have less time to do so. Her nest-egg needs to last her longer, and it needs to be bigger. And her nest-egg must be iron-clad and secure, so that it can keep her safe. It is therefore important that women, and their employers, take these factors into account. Women need to protect themselves, and their retirement planning needs are different to those of men.
What is the solution?
There really is no simple solution, as societal changes typically take time to play themselves out. But it is possible to educate women in the workplace, so that they can plan adequately for their retirement. We can’t bury our heads in the sand like an ostrich – we need to look at ways to allow women to build a bigger nest-egg.
Perhaps we need to be innovative in our solutions. Gender-nuanced life-stage models are a potential solution, meaning that women will spend a longer time in the more aggressive, capital-accumulating phase. To date, there haven’t been many structured savings products designed for women, but maybe it’s time for financial service providers to have a rethink. Perhaps legislative changes could allow for the fact that women live longer, and are able to work productively for longer, and should therefore have a higher retirement age (say age 70 as opposed to age 65).
Food for thought:
Nonetheless, while the mills of change do slowly grind, we offer a few useful tips for women when it comes to saving for retirement:
Start early – it’s critical to start building a nest-egg as soon as one can, particularly since a woman is likely to require more time away from the workplace
Think bigger – women live longer than men, and therefore need to build a bigger nest-egg. A common rule of thumb is to put aside 15% of pre-tax earnings for retirement, women should ideally be aiming for 20%
Safety first – don’t get stuck in a debt-trap and don’t get hoodwinked by unscrupulous service providers
Get educated – assess different service providers and savings options
Stay the course – avoid the temptation to retire early and avoid the temptation to cash out retirement savings. Remaining employed, and continuing to contribute toward the nest-egg for as long as possible, adds significant value to a woman’s retirement savings. It also adds to her ability to live comfortably in later life.
Take charge – women cannot afford to leave financial planning too late, or to leave it to their partners.