Solving the Savings Shortfall
It’s never too early to plan for the future. However, it’s an unfortunate fact that women are still generally earning less than men, so we need to save more of our income just to achieve the same retirement pot. We also live longer; expected longevity is increasing, and 42% of women in good health who reach age 65 are now expected to reach the age of 90.
Therefore, even if you work until you are 60, that leaves 30 years during which you will be dependent upon your retirement fund. So, it's easy to see why we need a plan to ensure we have a regular income to continue to support us.
As women, our lives can be subject to some major changes. We are more likely to have taken time out of the workplace to raise children, and thus are less likely to have had the opportunity to accumulate sufficient wealth to allow us to enjoy a carefree retirement.
A recent survey in the US found the gender gap increasing not only for earnings, but in confidence; only 55% of women feel confident about retiring comfortably, and 43% of women believe they are building a sufficient nest egg, compared to 68% and 59% of men, respectively.
Another disturbing fact is that 15% of widowed women over age 65 live in poverty, with that figure increasing for divorced women (17%) and those who never married (23%).
[Related: A Money Conversation Part I: Your Self-Worth]
Why start now?
Whatever your current situation, now is the time to consider your retirement needs, as the earlier you start saving, the better chance you will have of achieving your goal. The benefits of starting early are many: If you start saving in your 20s, your money has plenty of time to grow to become a substantial sum, and you could find yourself enjoying a luxurious retirement.
By the time she reaches 70, a 25-year-old worker will have saved a pot twice as large as someone who delays saving until she is aged 40. Although retirement is a long way off when we are in our 20s, and we may have other priorities (such as saving for a house), the impact of delaying starting your retirement fund is significant.
How to save?
With returns from cash at historically low levels, we need to look at other ideas. It is essential to invest in a cost-effective plan, as excessively-high charges will erode the value of your savings and counteract the growth accumulated by the underlying investment, which is such an important factor in determining the end value of your pot.
Also key to the end result is selecting an investment manager with an excellent long-term performance track record and strong investment process. It is also important to diversify between different assets, such as shares, bonds, and property. You should review this mix regularly to make sure it matches current market conditions and your own appetite for risk and reward.
Can I afford to save?
I would suggest that you can’t afford not to. Bear in mind that you don’t have to be a high-earner to start a savings plan, and even if you can only put aside a small sum into a bank savings account each month, you will be surprised at how quickly this will grow in the background without you even having to think about it.
We all have different values and aspirations, but by starting to save today and making your money work for you, you have nothing to lose and everything to gain.
Zoe Cousens is the owner of Castellet Consulting, an independent investment suitability assessment service providing bespoke portfolio analysis to fiduciary companies and HNW individuals and families. She recently founded the Women’s Investment Network – “WIN Middle East” – an investment club to help and inspire women to become financially informed by sharing expert knowledge.
Have more questions? Follow up with the expert herself.
Founder & Director
Women's Investment Network
Zoë's career in financial services began in 1986 as one of the first women to work in the London Stock Exchange, since which time she has worked continuously in the financial services industry. The majority of her career was spent in Guernsey, Channel Islands as an Investment Manager for Private Client, Family and Trust portfolios for a subsidiary of a large London investment company. Whilst based in Guernsey, she set up a successful pension scheme for... Continue Reading
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