Do women have specific retirement needs?
16 September 2016
You can also listen to these podcasts directly from the Old Mutual app, which is available here.
On mobile, on digital, on demand, this is Old Mutual Live, Money Coach, hello and welcome, my name is Chris Gibbons. We’ve been talking on Money Coach about planning for retirement. Most South Africans don’t pay enough attention to retirement planning. Many of us wind up living in very difficult circumstances.
But for South African women, retirement planning can be doubly difficult, given the multiple roles so often played by women in their households. I thought it would be instructive if Old Mutual Money Coach spoke to an expert. We’re joined now from Johannesburg by Old Mutual Life Assurances Legal Advisor Manager, Shakira Bodasing. Shakira, welcome, good to chat to you.
Shakira Bodasing: Thank you very much Chris good to be here.
CG: Is retirement planning different for women and if so, why?
SB: I would just like to start off by saying Chris that the vast majority of financial advice is the same, regardless of sex. Especially as the boundary between his and hers is becoming very blurred. That being said however, I believe there are certain issues that are unique to women that require special attention.
Keep yourself in the retirement loop
One of the issues is the higher likelihood of career interruptions experienced by women as a result of starting a family. This is certainly a factor that needs to be taken into account when planning for retirement. Another factor to be taken into account is that women tend to live longer than men. On average men live between 14-24 years after retirement and women between 21-28 years.
CG: It is said, far too many women leave retirement planning to their husbands and find themselves left high and dry when their partners die. How do you overcome that problem if you’re a woman?
SB: This is an unfortunate twist. Just looking at the facts, one in four women are on their own at age 64, whether through divorce, separation or widowhood. It is therefore important that women ensure that they’re involved in every stage of financial planning as they will require complete independence.
Another fact is that women make up 44.6% of the working population in South Africa. This to me is a strong indicator of the contribution that women are making to the household income. Meaning that if our partners are relying on us now, they will in all likelihood rely on us through to our golden years together.
CG: When should women start planning? Presumably they would do this in conjunction with their partners, if they have one?
Get the ball rolling when you start working
SB: I would advise women to start planning as soon as they start working. Time is your best friend. Women need to focus on establishing themselves first in their careers. This is generally what tends to happen, and then they settle down later.
Therefore, it is important that you start planning earlier in order to achieve retirement goals. My advice would be to make sure that your house is in order first. That your finances are secure. Then look at how you can support each other as a couple.
It is important that you have a clear idea of your spouse’s retirement plan, so you are able to coordinate and support each other. Your retirement plans need to include your expectations about who will help care for you as you age. What financial resources are available for your medical aid needs and personal caregiving needs as well.
CG: What about if the person is a single woman?
SB: I would say that the same principle applies. Start saving for retirement as early as possible in order to meet your retirement goals. Once again I emphasize, time is your best friend.
Everyone can do with advice
CG: Single or married, do women need help and advice?
SB: Absolutely Chris, financial security should be a high priority for women, single or married. It is highly recommended to get expert advice on the matter so that you meet your financial goals with ease.
CG: Which pension plan is going to be the best one, how does anyone make that decision?
SB: A pension plan that is tailor made by your financial advisor to suit your unique needs and circumstances. Whilst also ensuring your retirement goals are met is the best plan. This plan should be structured after doing a holistic financial plan.
That is for example taking estate planning and investment planning also into account. It should cover what your financial needs will be at retirement and how to address any shortfalls if needs be. It is also important that this plan is reviewed annually or when there is a change in your lifestyle.
CG: If a woman has a pension plan at the company she works for, does she need anything in addition to that? Does she need any of the stuff that you and I have been talking about now?
SB: Yes Chris, as a rule of thumb, during retirement an individual will need 70% of their financial income, increasing every year by the rate of inflation to maintain their pre-retirement lifestyle. Which means that you will, in all probability, need to supplement your pension savings that you have at work.
Also, there will come a time when you leave your employer and this is usually when you are tempted to cash out your pension. Therefore, I believe it is imperative to have a separate retirement savings vehicle that keeps you in check, so to speak, and disciplined. Such as retirement annuity, which offers you access to your savings as at date of retirement.
What role will tax play?
CG: You’re listening to Old Mutual Live, the Money Coach edition, on demand, visit dogreatthings.co.za. Final question Shakira, tax and retirement planning, where does tax fit into the picture. Is that something I would discuss or the woman would discuss with a financial advisor.
SB: Tax is one of the main factors that come into play when you are planning for retirement Chris. Your financial advisor will discuss techniques for you to reduce your tax payable at retirement. Just so you can maximise your income at retirement. It is important that you invest in an approved or designated retirement vehicle.
Because the money that you put aside here will be tax deductible, which is a big bonus. It has income tax advantages in that a member of a retirement fund can claim a tax deduction of 27.5% of the greater of a taxable income or remuneration, limited to an amount of 350 per annum. It’s also great Chris because retirement fund is not subject to capital gains tax. Let’s fast forward to your actual retirement, when you retire, you’ll want that lump sum, not exceeding R500 000. It’s taxed at zero percent and the balance is taxed at a sliding scale.
CG: There we’ll leave it. This has been another edition of Old Mutual Live Money Coach, my name is Chris Gibbons. With me on the line from Johannesburg has been Old Mutual Life Assurances Legal Advisor Manager, Shakira Bodasing.
Remember, please feel free to get in touch any time if you have any questions for me or topics you’d like covered on Old Mutual Live Money Coach. Feel free to send them direct to me at firstname.lastname@example.org. I’d be delighted to hear from you. Until the next time thank you for listening. Old Mutual Live, on mobile, on digital, on demand.