Common reasons that delay women’s retirement planning

By Louise Chan

July 18 2018
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Amidst the daily demands facing women, some money mistakes may ultimately compromise their financial standing and become roadblocks to achieving financial independence.

Common reasons that delay women’s retirement planning

There are many contributing factors in women’s daily lives that lead to mismanaging money, such as employment income, spending habits and upbringing.

Common money mistakes

According to the Australian Bureau of Statistics (ABS), Australian women have an average life expectancy of 84.4 years, while men only average at 80.3 years – this means women need to learn how to manage their own money at some point.

Some of the financial missteps that women should watch out for are:

Giving up control over their money
Not taking charge of their super
Prioritising everyone else
Not realising the time value of money
Allowing emotions to dictate the flow of finances

Giving up control over their money
Many married women, whether employed or not, leave the management of their joint finances to their spouse. However, this lack of involvement could spell trouble in the event of a relationship breakdown or their spouse’s sickness, incapacity or death.

There is no right way to manage joint finances, but women should still share some responsibility in the management of finances, especially their own income. Having a separate account for personal savings is also recommended.

Not taking charge of their super
The 2017 Household, Income and Labour Dynamics in Australia survey revealed that the average superannuation balance of female retirees was $230,907, with a median of $110,952. These figures are just half of the $454,221 super balance, with a median of $325,200, that men retire on – give or take a few thousand dollars.

One of the biggest reasons for the difference is the tendency of women to take longer time off work or decrease work hours to care for family. The decreased income also reduces their salary guarantee contributions – a big factor for the balance gap, especially if they make little to no salary sacrifice.

Instead of trying to catch up with super contributions after life events force them to take time off work, it may be wiser to make additional contributions earlier.

Prioritising everyone else
Since women tend to live longer than men, it’s imperative for them to have a bigger nest egg in retirement.

However, many women tend to push their own financial needs to the bottom of their priority list and address everyone else’s needs first.

Their incomes are usually allocated for meeting expenses to care for their aged parents or provide for their family or children. This fact was revealed in the 2014 Women and Money Across Generations survey, which collected the responses of more than 2,000 women aged 18 and older.

RMIT University found that 80 per cent of the participants said their top financial priority is to provide for their family’s short-term needs, and 40 per cent felt guilty if they spend for themselves instead of their family.

While their intentions are good, women end up compromising their long-term financial security for everyone else’s short-term needs. Professionals recommend that women should also prioritise their retirement, even with something as simple as making an additional salary sacrifice.

Not realising the time value of money
Combined with the fact that some women do not prioritise their financial future, many also push back investing for when they generate a larger income.

A few realise that even small additions to their super can go a long way. If they invest early to take advantage of the time value of money and the rewards of compounded interest, their super balance could grow larger.

Allowing emotions to dictate the flow of finances
Many women in relationships tend to let emotions get the better of them and make bad financial decisions. Some women’s spending are based on impulse, fear or shame and guilt, among other considerations.

Some women shop impulsively when they are emotionally compromised. They may also spend more money out of fear of being ostracised or to avoid embarrassment.

There are also women who tend to feel guilty when they are more financially secure than their family, friends or partners and tend to bail those people out of their financial troubles.

Mistakes can be avoided with financial literacy

Everyone makes money mistakes, but they can also recover from it by making appropriate changes with their behaviour. When it comes to money problems, investing in financial literacy is the best solution for everyone.

About the author

Louise Chan

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

About the author

Louise Chan

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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Retirement