Five things women can do to prepare for retirement

Summary: Society talks a lot about gender inequality in many forms, for example the lack of representation of women in leadership roles or the ways women are discriminated against in certain professions. But what about gender inequality when it comes to retirement planning?

The impact of gender on retirement planning

A traditional view of the financial industry was that household finances were often managed by men. For example a typical 1950’s picture in the UK might have shown men going out to work and women assuming the role of housewife, looking after elderly relatives and/or raising children.

It's still often the case, in many families, that women are the primary caregivers for children as well as other family members in need. This can result in women putting careers on hold, either partially or entirely. And, as a result of working less, women will often have a smaller (or no) workplace pension and less income to invest for their retirement nest egg.

Another contributing factor to women’s weaker financial position in retirement is the gender pay gap. According to the Office for National Statistics (ONS) the gender pay gap in 2023 was 14.3%. This means that when in paid employment, women are still earning 14.3% less than men for their labour. Less pay means less disposable income than men to invest and to save for retirement.

All of these factors are likely to play a part in women generally having a lower sense of financial confidence when it comes to their financial future in retirement.

Actions women can take to feel more ready for retirement

Building a more secure financial future is important for everyone, but especially for women, whose lower savings and longer life expectancies put them at risk of outliving their money. If you’re thinking about your financial future and how to position yourself better for retirement, here are some things to think about.

1. Start saving as early as possible

It may be tempting to postpone saving for retirement, especially in a cost of living crisis when it’s a challenge to make ends meet. But if possible, starting to save early – even in small amounts – is important. Saving earlier gives your money more time to grow. It also means that if your money is invested, it has more time to recover from the ups and downs of the market. Please remember that the value of your investments can go down as well as up so you might not get back the amount you put in.

According to our research in October 2022, financial pressures and challenges are being felt disproportionately by women. Concerningly, far fewer women than men have reported actively saving for retirement. In fact, 27% of men had set up an ISA to save for retirement compared to only 18% of women.

Statistically, women are likely to live longer than men and consequently will have to support themselves for a longer period in retirement. So starting to save as early as possible or saving a little bit more while you are younger really can help make a big difference when it comes to retirement goals.

Given all the factors discussed, it’s understandable why women tend to save less. But saving less leaves women in a less secure financial position when it’s time to retire.

2. Estimate how much money you’ll need in retirement

Figuring out what income you’ll need in retirement begins with knowing your current costs. To understand this you’ll need to make a list of your outgoings and also think about how those costs may change after retirement.

For example, some current costs, like commuting costs may go down after retirement. Other costs, like heating bills, may rise as you might spend more time at home. You may not have a mortgage in retirement, but there will still be home repairs and upkeep.

Once you’ve added together all your potential expenses and know which ones might rise or fall, you’ll be better placed to understand how much money you’ll need to receive from your pension and other sources to maintain your lifestyle in retirement.

3. Know the current and future value of your pensions and investments

It’s a good idea to get familiar with what pensions you currently have, whether through a workplace scheme or a private pension. Many pension providers make this information available online. If yours doesn’t offer an online service, you can contact them directly to check the value of your pension.

Working out what you have now and what you might have in retirement allows you to plan and look at ways to help make up any potential short falls as soon as possible. Although a short fall isn’t something anyone wants, being aware of the situation ahead of your planned retirement date gives you time to adjust course and consider your options for closing the gap.

If you have other investments, again, it’s a good idea to check the values and review where your investments are, how they are performing and whether they are still right for you.

4. Gain confidence from research that says woman are better investors

Research shows that as many as 39% of women aren’t confident of a comfortable retirement, compared with 25% of men.

If you’re not feeling confident, take heart from this research by the Warwick Business School that showed that the returns for female investors were almost 2% a year higher on average than those of men. These studies concluded that female investors exhibited behaviour better suited to long-term investing. Women tended to take a more balanced and less impulsive approach than men in the study – avoiding speculative investments and trading less often.

As with any investment past performance is not a guarantee to the future and returns are not guaranteed.

5. Talk to friends and family

Talking about money with our nearest and dearest isn’t generally top of anyone’s ‘to do’ list. But why is this the case when money is such an unquestionable part of our lives? Maybe we feel that we don’t have the right level of financial insight to talk to people and worry we might end up sounding foolish, or perhaps it is down to good old etiquette – we simply don’t talk about money? 

If you have influential women in your life, why not have an open conversation about your financial goals and experiences? If we think about money in the same way we do about our health and fitness, our careers and even our holiday destinations, conversations offering guidance and insight have the potential to influence our decisions and financial situations in some way.

Alternatively, there are plenty of online sources of help, for example, the Citizens Advice Service offers helps on a host of topics about debt and money. You can get information about debt management, finances and mental wellbeing, saving for pensions, banking and much more.

Could you benefit from financial advice?

A financial adviser will learn about you and your needs, then recommend ways to help get your money working as hard as possible so you can reach your goals. For example, an adviser may be able to find ways to mitigate the potential financial impact of any career breaks you may have taken, see what risk you are comfortable taking and can afford to take, and create a plan to get you on track for the retirement you want.

If you don’t already have an adviser but would like to explore this option, you can find a financial adviser that's right for you at our ‘Get financial advice’ page. 

The views expressed here should not be taken as recommendation, advice or forecast. We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser.