Women as financial breadwinners are not saving enough for retirement

Caroline Naylor-Renn

Meet Jane Brown, an administrative clerk at a law firm, with two young children, who recently divorced her husband after 20 years of marriage.

She is now faced with high levels of debt and retirement is a far-flung dream. Living a fairly comfortable life in Johannesburg, she never saved enough money for retirement and has no investment fund; having completely relied financially on her husband. Now forced to start her life over, and having to become financially independent, she still has to save a portion of her salary towards retirement and look after her children with very limited financial support from her ex-husband.

This is a typical scenario of a middle-class South African woman who’s struggling to make ends meet, never mind saving for future retirement on the horizon. Women have consistently been rated lower than men in most metrics concerning financial wellbeing and continue to fall behind men when it comes to preparing for retirement.

According to the 10X Retirement Reality Report 2023/2024, fewer than six percent of people are on track to retire comfortably. 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.

Caroline Naylor-Renn, 10X Investments COO, says: “We are increasingly seeing the rise of women holding positions as financial breadwinners in South African households; shifting the financial power dynamics within families, yet more often than not, retirement planning falls at the bottom of their list of priorities.”

Gender wage gap

Women have different financial goals, priorities and challenges compared to their male counterparts; and are often faced with higher family and health expenses.

According to a 2022 Women’s Report, sponsored by the Stellenbosch Business School, women’s careers are typically 30% shorter than those of men – because they have taken time out to be caregivers for their children and elderly parents. Furthermore, more than 50% of South African mothers are likely to be the sole breadwinners of their families raising their children alone, with only around 20% receiving regular support from the father.

In South Africa, women made 78 cents for every rand that men made in 2021, down from 89 cents in 2008, according to a study on the SA-TIED program. This is a loss for gender equality, a trend that should urgently be addressed.

Changing life trajectory

Women make up 47% of the formally employed in South Africa and women continue to encounter more obstacles to securing formal employment compared to men, according to a Stats SA Report. This is often worsened in poorer socio-economic conditions; thousands of women every day continue to face financial struggles amid a cost-of-living crisis as financial breadwinners. This is further compounded by certain life trajectory changes, such as divorce; which can impact retirement savings including pension interest.

For many women in South Africa, divorce is a reality and is not only an emotionally challenging experience, but a financially taxing one as well. Where there previously was one household, suddenly there are two separate households with financial implications including retirement savings.

Pension interest allows divorcing spouses to share in each other’s retirement benefits at the date of divorce without having to wait for formal retirement to receive their share of the assets. The manner in which pension interest is calculated depends on the type of retirement fund the individuals have in place.

Women need to approach investing differently

According to the 10X Retirement Reality Report, women are more conservative and tend to save more than men (30% of women versus 26% of men), while men tend to invest more (24% of men versus 14% of women).

Naylor-Renn says that while women tend to value safety and security over exercising high-risk investments for potentially larger return; there is benefit in investing aggressively at the start of a career and then more conservatively later in life.

According to Naylor-Renn, it’s never too late to start working on a retirement plan and working towards your retirement goals. Contact a financial advisor to help you develop a financial plan and to regularly monitor your investment strategy. Pay off debts early and invest in diversified asset classes. Building a well-diversified investment portfolio that’s aligned to your retirement plan is key to making informed decisions.

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

“Ultimately, women need to be thinking about financial wellbeing and retirement savings differently. To understand that there are multiple factors and considerations when putting together a financial plan. Financially planning requires long-term strategic thinking not only around current financial status but also to plan for those unforeseeable events,” adds Naylor-Renn.