- Despite living longer than men, women retire with less money.
- Superannuation is a major concern for women, many of whom are retiring in poverty.
- Changing attitudes and demographics mean that more women are taking charge of their financial futures by investing.
When it comes to money, women are dealt a bad hand. In the Australian retirement system, where everyone’s treated as an individual, this is easy to recognise but harder to change. From archaic attitudes about women’s financial literacy to a social expectation of unpaid domestic labour, women go into retirement far worse off than men. Here are some of the reasons why—and how investing can make a difference.
Women earn less than men on average
The gender pay gap is real – women in Australia earn an average of 14.6% less than men, and in full-time roles that number rises to 22.4%. Reasons for this gap? Career breaks to start families, more women in lower-paying jobs (for example, teaching and nursing—a chicken-and-egg scenario), a reluctance to negotiate. Though the gap is shrinking in Australia, men working full time earn an average $27,000/year that women are missing out on.
Women take more career breaks
Women are more likely than men to do unpaid domestic work like raising kids and caring for sick or elderly family members. While this work is valuable—both to the economy and to the individual family unit—it’s rarely paid. It also doesn’t contribute to superannuation, and women often take time away from the paid labour force to do it (or juggle it around paid work, which can then suffer or decrease). Compounding this issue, women typically live longer than their male partners, meaning they need to account for longer retirements with less in super. It’s a real no-win situation.
Women are more likely to rely on their male partners to handle finances
Statistically speaking, women married to men have traditionally deferred money matters to their partners—or perhaps men have more actively pursued the ‘money manager’ role. This is particularly true of older generations, but the pervasive myth that women aren’t as good at maths acts as a kind of self-fulfilling prophecy, damaging women and girls’ confidence at all ages. But the real kicker is that women are just as good at investing as men–if not better.
Further investing is essential, but where should you start?
We’re currently seeing the outcomes of these harmful cultural stereotypes. In Australia, women are currently retiring with a whopping 47% less superannuation than men. And that’s just the average, meaning there are plenty of women with even less.
That’s an alarming statistic. And it’s not the only one. Women in Super estimate that 40% of retired single women live in poverty. The 9.5% mandated by the government for retirement savings is simply not enough when you’re considering a higher likelihood of working part-time, for lower wages, or in the home.
One way to secure a comfortable retirement over a longer period of time–thinking about housing, healthcare, and aged care over 20 or 30 years of retirement–is to accelerate your retirement funds through further investing in a diversified portfolio. Investing, rather than saving, is crucial: over long periods, any interest earned on savings held in the bank will generally be eaten by inflation. And the earlier you start, the better—a delay in investing will cost you.
Another way is to take advantage of the concessional (before-tax) treatment on additional super contributions. In addition to compulsory payments by your employer, these contributions could include salary-sacrifice payments or further amounts paid by your employer to super before tax. Concessional contributions are taxed at 15% once they’re in your super account, and you can contribute a maximum of $25,000 a year (unless your annual income exceeds $250,000). If you make more than $250,000 a year, you’re looking at up to a 30% tax rate. Either way, it pays to stick to the limit—you’ll pay less in tax while substantially (and once you’ve set it up, nearly passively) beefing up your retirement savings. You can learn more about growing your super, and the applicable taxes, at the ATO website.
Times are changing for women investors
It’s heartening to see that more women have the opportunity and motivation to build their own personal wealth. Workplace barriers are breaking down, meaning that more women are earning at a higher level. Workplace policies and gender roles in heterosexual relationships are shifting, meaning more men take on childcare responsibilities.
Additionally, more women are remaining single, creating a greater incentive to build their own financial security. That said, ‘pinkwashing’–the approach that some financial advice businesses take—can be patronising and off-putting, so women are searching for businesses that won’t talk down their role in their own financial futures.
Goals-based investing: ideal for women
According to US-based investment management firm Ellevest (of which Morningstar is a shareholder) women are motivated by goals-based investing. They invest to achieve something concrete like buying a house, launching a business or retiring comfortably, instead of just investing for investing’s sake. A managed investment portfolio, like one of Morningstar Next’s portfolios, can help you achieve these goals on autopilot.
Clearly, there are age-old systemic factors here. They’re not easy to combat. But if you’re a woman looking to secure your financial wellbeing and buck the historical trends, you can make the system work harder for you. Investing is a key piece of that puzzle.
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