Women must up their investment game for comfortable retirement
Saving for retirement years isn't easy for anyone, especially with low interest rates, inflation creeping back up, and what can feel like a challenging investment backdrop.
But for women, it's even harder. It has been demonstrated time and time again that women are paid less than their male peers. Women are also natural nurturers and so are much more likely to be the ones to take time out from their careers to care for children or sick relatives.
Finally, since women have a longer life expectancy, whatever they save must last them for longer. Thankfully, the landscape for women in the workplace is changing. For example, more women are not only spending more years working, and therefore having greater total career earnings; they are also doing so in more senior, better-paid roles. While this represents some progress, there is still much more that women can do individually.
Here are four areas I encourage women to focus on to help bridge the gender investment gap and provide for a more enjoyable and comfortable retirement.
First, start planning young. The sooner you start planning for your retirement years, the more you will know about your finances and the more in control of them you will be. The sooner you start to contribute towards a pension, the larger the compounding effect will be. The most practical application of this is that, even if you take a career break in your 30s or 40s, if you have already contributed towards a fund in your 20s, that pot will be growing in the background and you will be starting from a much stronger position when contributions recommence on return to work.
Second, have a sound investment strategy. The power of compounding is a moot point unless the individual has a robust and coherent investment strategy. Women can be quite good at savings but it's the investment piece that is often lacking. If you are talking about your retirement years - whether it be 10, 20 or even 30 years down the line; no matter how choppy a market is short-term, the long-term benefits of taking on some investment risk should be rewarded.
Due to women's shorter working life and longer retirement life, the money women save now needs to work even harder than that of their male peers. Once time is on our side, taking on an appropriate level of investment risk is the sensible thing to do and equity risk is one of the key sources of long-term investment returns.
Third, strike a balance. There is no point in spending every penny you earn to have a great life now if it means a massive drop in living standards as retirement approaches. With more people choosing to be single and the divorce rate rising, women can't assume they will have a partner to support them later in life. Women need to make a conscious decision about what to spend now and what to save for their future.
Fourth, women should keep their toes in the working world. It is often during the period that women take a career break that men's salaries jump, leaving women behind. While women might have a desire to take a full break during their career, working at least part-time can help women avoid eating into their savings, maintain their confidence, and give them some chance of keeping up with their male peers' salaries.
Living longer is a good thing, so women should do their best to ensure they are healthy and have enough assets to support the lifestyle they desire in retirement.
Catherine Flavin is an investment manager at Investec Wealth & Investment (investec.ie)
Any investment commentary in this column is from the author directly and should not be seen as a recommendation from The Sunday Independent
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