Women typically face a greater retirement savings shortfall than their male counterparts. A longer life expectancy coupled with lower compensation throughout their lifetime creates a larger financial burden over a longer period compared with the needs of male retirees. In addition to earning less, on average, female workers also spend more time out of the workforce for various reasons than do male workers.  Women are more at risk for certain diseases that could cause a major and debilitating health crisis; and they typically take on more family responsibilities when it comes to raising children and caring for ageing parents.  While the fundamentals of sound financial planning are the same for both men and women, there are particular lifestyle and work conditions that are unique to women, and these need special consideration.

All around the world, people are not saving enough for retirement or a major health crisis. This savings gap is widening as people make trade-offs against savings in favour of more immediate daily needs. Women in particular face other limitations that play a role in how they need to approach their financial planning that are not immediately apparent, but play a major role in the standard of living they can look forward to when it comes to retirement and healthcare.

Aon highlights the following important considerations for women when it comes to retirement savings and healthcare planning:

• Income:  Typically, women are paid less than their male counterparts, and this means that the percentage provision for retirement savings will also be less.  As a rule, you need to invest 15% of your salary for 40 years to retire comfortably, but if you’re already only making ends meet, 15% of your salary is out of reach for many.  Aon’s global retirement savings research shows that the actual savings provision by employees is closer to 5-6% – an enormous shortfall on what is needed in reality.
• Life expectancy:  Adding to the retirement savings gap dilemma, women have a longer life expectancy than men on average.  This means you will live for longer on your limited retirement savings, so your savings provision should be much higher than male retirees.  The possibility of outliving one’s retirement savings is a significant concern.
• Health crisis: We need to realign our views on crucial financial products such as income protection, disability and critical illness cover.  Regardless of whether husband or wife in a household is struck down by a health crisis, the impact on the family is likely to be profound.  Even a stay-at-home-spouse who does not receive a formal salary contributes substantially to the family’s financial position. Consider the costs of having to find someone trustworthy and very competent to care for and raise children and ageing parents, play teacher, taxi driver, housekeeper, cook and major caregiver in the home. There are significant hard costs to the role that women play in the family that amount to much more than a decent executive salary.  Bottom line is, if you are impacted by a serious illness that leaves you temporarily or permanently disabled, or worse you pass away, someone will need to step in at significant cost to keep your family and household functioning as normally as possible.
• Your child’s health crisis:  women typically are the primary caregiver in the household, so the consequences of a child’s serious illness or disability can have a profound impact on your ability to earn an income should you need to take time off, possibly permanently to care for your child.  For single mothers this could be catastrophic.  Talk to your broker about critical illness products that extend cover to your children for serious medical conditions.
• Medical aid cover: joining a medical scheme is crucial to ensure that you can afford the financial implications of an unexpected illness, an accident or health condition.  Given the high costs of private healthcare in South Africa coupled with a growing burden of disease such as cancer and heart disease particularly among women, there is little doubt about the importance of having some form of medical aid cover. Statistics show a growing prevalence of certain cancers in younger women between the ages of 20-39 such as breast cancer, melanoma, sarcomas, cervical and ovarian cancers, thyroid cancer, colorectal cancer, brain and spinal cord tumours. The statistics paint a harsh reality that cancer is increasingly being diagnosed in younger women who are unprepared for the financial implications of what it takes to fight a life-threatening illness.
• Gap Cover: Specialists and in-hospital charges can be up to 400% of the benefits offered by medical scheme. So, if your medical scheme only pays out 100% of tariff, you will be liable for the shortfall or remaining 300% out of your pocket.  This can amount to thousands of Rands and leave you in a serious financial predicament.  Here gap cover policies for medical scheme shortfalls are proving to be invaluable safety nets by covering certain in-hospital and Specialist shortfalls that may occur, at a relatively inexpensive monthly family premium.
• Sandwich Generation Challenges: Many South African adults are caught in what is called the ‘sandwich generation’ – taking care of ageing parents while also supporting children of their own. These responsibilities are often most heaped on women and must be factored into your financial planning.
• Lump sum vs income benefits: Income benefits are well suited to complement individual lump sum benefits and benefits from employer-provided schemes.  There is still a lot of misunderstanding around the interplay between lump sum and income benefits – the reality is that both play a vital role in a sound financial plan.  People often perceive that they will get income benefits provided through their employee group scheme benefit, but this is rarely sufficient on its own and it is always a good idea to take an additional product to top this up.
• Make use of group benefits: make use of employer group benefits which often come at a lower cost due to the pooling of risk, and especially where employers extend that cover to spouses.  Always talk to your broker about the interplay of employer-provided benefits with your own individual financial planning and ensure that these work as a cohesive and well-rounded financial plan.

Financial planning is vitally important regardless of gender, but there are nuances of women’s lifestyles and work conditions that require special consideration.  The advice of a professional broker is vital to guide you through these important considerations as they apply to your unique circumstances and specific needs.

Johan Botha is the Business Development Head at Aon South Africa’s Employee Benefits division.