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How Kiwi women are missing out on $60,000 in retirement savings

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There is a lot spoken about the gender pay gap. The gender pension gap, however, is actually much larger compared to the gender pay gap. In 2015, the average New Zealand woman would retire with $60,000 less than men in their KiwiSaver account, according to ANZ. The gap is widening, as in 2017 the average woman will have $80,000 less.

On average, women earn less income than men which directly impacts the amount of money that women have in their KiwiSaver account. This scheme is based on contributions from your income, and it puts women at a disadvantage when saving for retirement.

A study done by Strategic Pay, a remuneration consultant, has found that women receive 16.5 percent less of employer contributions in KiwiSaver compared to men, mostly due to the wage gap. Less employer contributions can translate to less funds available for retirement which could affect the quality of women’s retirement.

Aside from the gender wage gap, this problem is compounded by women being more likely to take time off work to look after children, and putting a pause on their contributions to KiwiSaver. So what can we as women do to be more prepared for our retirement?

Goal setting and thinking about the future

Take more interest in your KiwiSaver investment and set some goals on what you want to achieve during your retirement. Start thinking about your retirement now so you are able to build up a clear long-term plan earlier, which allows you to be more prepared about your future.

When building a retirement plan, take into consideration how much you will need in retirement, the age you are planning to retire, how long your retirement will be, etc. Think about the lifestyle that you want in your retirement and plan respectively. To be more prepared for retirement, remember to take into account inflation in your calculations, as your retirement savings will be worth less in the future.

Adjust your contribution accordingly

On average, women have longer life expectancy than men so it would make sense to have more money saved to be able to fund longer average retirement. Think carefully about your contribution rate to KiwiSaver and contribute more if you can. The more you save now the easier it could be later in retirement as your money would grow in KiwiSaver.

If you are not an employee, you can still make voluntary contributions to your KiwiSaver account to not miss out on government contributions. Putting as little as $20 per week into KiwiSaver means that you are contributing $1,040 annually into your account, which gives you $520 of government contribution.  

Make sure you are in the right fund type

There are many different KiwiSaver funds available to choose from. You have to ensure that you are in the right fund type that's suitable for your situation and your investment time frame. Being in a fund that is too conservative for you may reduce your long-term return that will impact the funds available for you in retirement.

Falling KiwiSaver balances earlier this year caused by COVID-19 has led to a lot of members switching their KiwiSaver fund to a more conservative fund. It is important to know that most funds invest in shares too and when the prices in share drops, it is reflected in your KiwiSaver balance. Since the share market values are expected to increase after an economic drop, it is better to stick to your long-term investment plan and ride out these short-term fluctuations.

Don’t shy away from financial advice

You will become more confident in your investments when you already have a financial goal in mind and a clear long-term investment strategy that suits your situation and goals, which can be quite difficult to develop. It is worth seeking financial advice from a professional, especially before you make an important decision regarding your investments.

At National Capital, our Authorised Financial Advisers guide our clients on developing their own KiwiSaver investment plan to achieve their financial goals for retirement. After building your personalised KiwiSaver investment strategy, we then determine the most suitable KiwiSaver fund for you. Submit our KiwiSaver HealthCheck and you can be on your way to a more financially secure future.

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We have to be more prepared about our future. It is never too early or too late to start planning for our retirement.
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