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 - indeed, expected longevity is increasing and 42 per cent of women in good health who reach the age of 65 are now expected to reach the age of 90. Therefore, even if you work until you are 60, that's 30 years during which you will be dependent on your retirement fund. So, it is easy to see why we need a plan to ensure we have a regular income to continue to support us.
The why of it
As women, our lives can be subject to some major changes. We are more likely to take
time out of the workplace to raise children, so 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 per cent of women feel confident about retiring comfortably and 43 per cent of women believe they are building a sufficient nest egg, compared with 68 per cent and 59 per cent of men respectively. Another disturbing fact is that 15 per cent of widowed women over the age of 65 live in poverty, with that figure increasing for divorced women (17 per cent) and those who never married (23 per cent).
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 have of achieving your goal. Indeed, 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. For example, 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. So, although in our 20s' retirement is a long way off and we may have other priorities, such as saving for a house, the impact of delaying your retirement fund plans 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. Another key to the end result is to select 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 you can't afford not to. Bear in mind 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.
By Zoë Cousens
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Al Bawaba Business or its affiliates.
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