After career-interruption and a lifetime of caring for others, many women have good reason to be concerned about how they will manage during retirement, but research shows early intervention from a financial planner can help build confidence about the future, writes Clifford Fram.

Australians tend to worry more about their retirement savings than their health and ageing, with only climate change a bigger concern, according to an ABC survey of more than 50,000 people of all ages.

This worry can be intense for older women, many of whom are burdened by a savings shortfall after a lifetime of career sacrifice and unpaid family labour.

A study published by National Seniors Australia and Challenger shows six out of ten women aged 50 and older worry about outliving their retirement income while most men are untroubled.

“The outstanding issue addressed in this research is that Australian women are much more likely to have worries than men,” write the authors of the study titled Retirement Income Worry – Who worries and why?

“This is less related to longer lifespans and more to roles throughout life, in particular a combination of fewer work opportunities, disadvantages in divorce, greater burdens of care and spending family money on male partners who die before them.”

The authors say it is no surprise the study involving 3584 National Seniors members shows divorced and widowed women are among the most worried.

Interventions 

The authors suggest two areas of action:

• Preparation for retirement needs to start young and be sustained through life; and
• Australia must find a way to ensure no one is disadvantaged by taking on caring roles that prevent or limit the opportunity for accumulating retirement savings.

While the second point is a policy issue to be solved in Canberra, the first reaffirms the value of professional advice. The researchers write that  financial planners can play a significant role in reassuring women about their finances, and the younger this starts, the better.

“There is an urgent need to deal with the high levels of worry about retirement income.  Some financial issues cannot be easily fixed in later life, and need to be attended to along the life journeys. This is a message for people of all ages, not just older Australians.”

“People were less likely to worry frequently if they had sought financial advice and when they thought the advice met their needs,” write the authors.

It’s important, however, that clients realise there is little benefit if they do not act on the advice they receive or if they ask for it too late. And it’s heartening for financial planners that 86 per cent of people who received advice acted on it.

Dawn Thomas CFP^®_,  a financial planner with Wealthwise in Perth, is outspoken about the savings gap. “It’s telling us that it’s OK to undervalue women in society, by paying them less and expecting them to put their career and income second to acting in a caring role for their family. All those things add up and leave a great many women with limited super savings to draw on in retirement.”

Planning Passion 

Dawn is convinced financial planners can help compensate for society’s shortcomings.

“This is something I am very passionate about, and I make sure that any women I am working with are aware of it. I know that how we value people in society is not going to change overnight, so I will also tell them not to wait for the change to come. And that makes it really important that we put the work in together on their retirement plan.”

The National Seniors Australia researchers did a multivariate analysis of worry that shows the risk is:

• 68% higher in those who do not already identify as retired;
• 65% higher in those who have less than $500,000 in savings;
• 53% higher in those who expect their primary source of income in retirement to be the age pension; and
• 47% higher in women.

“It’s unsurprising that women worry more than men about retirement funding as 69 per cent of women have savings of less than $500,000 compared with 53 per cent of men,” write the authors.

The Women in Super advocacy group has published data that shows women on average retire with about half the super savings of men and that four in ten older single retired women live in poverty and experience economic insecurity.

Apart from the well-documented wage gap that still exists in 2020, reasons include the high proportion of women who work part-time and the average of five years women take out of paid employment to care for children or other family members.

Close to 45 per cent of women rely on their partner’s income as the primary source of funds for retirement, according to Women in Super.

However, Dawn points to the Senate report A husband is not your retirement plan. “This highlights the reality and dangers for women in retirement with little to no super. If their relationship should break down, they are left with only two choices – to be trapped in a home they don’t want to be in or leave and risk living in poverty and being homeless.”

COVID Opportunity

The COVID-19 pandemic is a new and unexpected threat to women’s financial security.

The latest Financy Women’s Index Report predicts physical distancing will exacerbate the gender pay gap, reduce retirement savings and increase the amount of unpaid family work women do.

“Women tend to be more highly represented in the most vulnerable sectors, such as retail, education and hospitality, which have been hardest hit by job losses and or reductions in hours and wages,” the report says.

“Women are also more affected as they are more likely to be in casual work, and anyone working less than 12 months in casual work does not qualify for the JobKeeper payment.”

But the pandemic can also be a financial planning opportunity for clients and a reason for financial planners to reach out to women.

“So many people impacted by COVID-19 are struggling with their finances. In talking with clients, I’ve realised that it’s actually giving them a reason to think more about the first steps to a financial plan – sticking to a budget and having an emergency fund. These can be things that people have shied away from in the past because they think that a rainy day will never come.

“Now it’s here, I think people are looking for ways to do more with their money, including their super savings. This is where financial planners have so much value to give to anyone who is facing the future and feeling more vulnerable in their financial position.”