Women and retirement – don’t count on your husband to BE your pension

Seperation, divorce, illness or outliving a spouse results in many women struggling financially in retirement. Don’t rely on your partner to support you in retirement, start planning for your own retirement now!

Case study: Judy

Judy has been married to Steve for 15 years. They have two children and, like many women, Judy stopped working for a couple of years to look after the children when they were young, subsequently returning to work part-time at a lower level when she had children. Five years ago, Steve had the opportunity of working in Hong Kong for several years and Judy gave up her job to move there with him and the children. Then, without warning, Steve announced that he wanted a divorce which forced Judy to reassess her financial situation.

Like many women Judy has not been contributing to a pension scheme on a full-time basis for much of her working life, because of several career breaks to look after her children and support her husband in his career. She had always relied on Steve to sort out the family’s finances with minimum discussion.

The sudden break-up of her marriage forced Judy to re-examine her financial situation and realise that she had never really sat down and sensibly planned for her retirement, relying entirely on Steve for their retirement plans. She had no idea how much money she actually had, nor how much she would need to put aside to enjoy the lifestyle she desired when the time came to retire – and she had no idea where to start…

This situation is actually very familiar. There are several things women need to think about – and sooner rather than later.

Women have smaller pensions…

Numerous statistics show that women still earn less on average than men. For many this is the result of taking career breaks to bring up children or care for elderly relatives. When they do rejoin the workforce, women are often forced to take lower-paid jobs. As a result, their pension pots are smaller – some estimate a gender pension gap of up to 40%.

… Yet they live longer

It is well known that women have a longer life expectancy than men and so in reality they often end up trying to manage for longer on a much smaller pension pot than men.

In many instances, and especially in an expat environment, women rely on their spouses financially…

Historically, for many couples, the husband is the main breadwinner in the family, while the wife often juggles a part-time job with family duties or chooses to look after the family full-time. Although times are changing in this respect, many women do still find themselves a situation where they are not financially independent and this financial reliance on their partner often continues into retirement.

…But what if something unexpected happens?

There’s every chance you may enjoy a long and happy retirement with your other half. But what if you don’t? Separation, divorce, illness or outliving your spouse could all mean that you end up struggling financially, without a proper plan in place.

Don’t get caught out! Start planning for your retirement now.

Become financially independent

Don’t just rely on your spouse to sort out your finances. Start taking an interest in your savings and pensions and responsibility for your future. As you learn more you will become more confident and financially independent – it’s not as complicated or terrifying as you think!

Start saving now

It’s never too early to start saving for your retirement. It is recommended that you should save 20% of your income for your retirement so start putting money aside each month and, if you don’t already have one, consider starting a private pension. One important piece of advice: each month when you receive your pay cheque, make sure the first payment you make is to yourself.

Budget and plan for your retirement

Arrange a free consultation with an Independent Financial Adviser. Work out how much you currently spend on essentials and luxuries and how much you are likely to spend when you are retired. Divide expenses into ‘essential’ and ‘if possible’ and don’t forget to include things like potential health care costs. Once you roughly know how much you will spend in your retirement you can work out how big a pension pot you will need and therefore how much you should be saving. You might find you have to cut down on your current spending in order to be able to enjoy the retirement you desire.

Determine goals and risk profile

Once you know how much money you will need and how much you have to invest you can work out your investment goals and your risk profile. How much growth do you want to achieve? How long have you got? Can you afford to take a risk with some of your investments or will you need to start cashing them in soon? At this point it would be prudent to speak to an independent financial adviser – a free consultation now could save you a lot of money in the long run and increase your investment returns.

Invest intelligently

Once you’ve started saving and you know your goal, you need to start investing in order to grow your pension pot. Again, it would be advisable to speak to an independent financial adviser to get individual and expert guidance on your situation. However, don’t fall into the trap of paying huge charges on your investments – follow these essential tips to increase returns on your investments.

You can no longer rely on the government to fund your pension.

Governments are freezing pensions and pushing the responsibility to save for pensions onto the individual. If you have a UK pension and are planning on retiring to France or abroad, make sure you understand the rules on transferring your pension abroad first or you could end up losing a large chunk of it to tax.

Make sure you plan for your retirement. Get in touch with a Forth Capital Adviser for a free consultation today.