With International Women’s Day having just passed a couple of weeks ago on the 8th March, I thought it would be a valuable insight to share some of the key risks for expat women when it comes to the gender retirement gap and what you can do to prepare for and overcome these risks. There have been numerous reports highlighting the gender retirement gap, with the World Economic Forum’s 2017 report revealing that it would take approximately 217 years to completely remove this gap. Further studies have highlighted that the gender retirement gap between men and women is on average 30 – 40% across the globe, with Australia currently sitting at a staggering 47% (Mercer).
This is particularly frightening and unfortunately expat women are at the greatest risk here. Without appropriate plans in place, many will find themselves seriously impoverished in retirement.
What’s causing the gender retirement gap?
There are many factors that are creating this retirement gap, some of which may be obvious and others less so. I’ve highlighted a few of these below:
- Women will tend to take time off to raise a family
More often than not, it will be the women that will take time off work to raise a family at home. In some cases, this will be paid leave, however many will take off extra time resulting in less time spent saving for retirement and potentially also creating some difficulty in returning seamlessly to the workforce. In Singapore, many expat families will have helpers at home, which allows many parents to return to work much sooner and may create less disruption to the retirement savings.
- Gender salary gap means women will save less each year
The gender salary gap is a well-recognised issue across the globe, and small improvements are slowly being paid, however there is still a long way to go. On average, across every occupation, the gender pay gap is 13.9% (Fawcett Society, Pinsent Masons), which means that each year on average, women are saving 13.9% less towards their retirement, particularly when it comes to mandatory retirement contributions such as CPF in Singapore or superannuation in Australia.
- Women make up the majority of ‘trailing spouses’
Studies have consistently revealed that the majority of ‘trailing spouses’ are women. PwC’s study also revealed that over 70% of male expats are married, which will often mean that their partner will have to step out of their current career to make the move abroad. While it varies across the global expat destinations, it has been shown that it’s very difficult for trailing spouses to continue working abroad, with only 11% being able to successfully do so. This can be due to a range of reasons including work permits, licensing considerations, education requirements or otherwise. In Singapore, many may be able to obtain a Letter of Consent to enable them to work part-time or even in casual employment, however it’s unlikely that the compensation will match their previous roles back home.
This further exacerbates the issue for expat women, with many taking a further 2 – 5 years out of the workforce while living abroad.
- The financial risk of divorce
While divorce is never a pleasant topic to discuss, it can be particularly devastating for expats. It can lead to international custody battles, trying to uncover global assets, unplanned travel and expensive legal costs. For expat women, the financial risk of divorce can be a serious risk to consider, as many may have far less, or no retirement savings. Let’s consider a brief case study:
Betty Smith is an Australian expat, who has been living abroad as a trailing spouse with her husband, Jim, for over 12 years with their two children. Betty was not able to transition her career given licensing issues, so the family decided that she would stay at home and raise the children. Unfortunately, the marriage has failed and Betty and Jim decide to get a divorce. Betty is currently 48 years old and has less than $100,000 in retirement savings from when she worked in Australia before moving abroad.
Betty now has to return to the workforce and save quickly to be able to achieve any sort of retirement. Let’s assume that Betty can secure a role earning $80,000 per year and wants to retire at 65 in Australia. Ignoring any pension entitlements that may apply to Betty’s situation, to achieve any sort of comfort in her retirement, Betty would need to save at a minimum 75% of her annual income towards retirement. If Betty wanted a comfortable lifestyle in retirement, then this would require saving over 100% of her annual income, an impossible task.
What can expat women do to combat such risks?
- Consider the impact of time out of the workforce
Ensure that you’re aware of the long-term impact of time spent out of the workforce. This may be a couple of years out to raise your child, or a year or two spent abroad as a ‘trailing spouse’. By being aware of the long-term impact, you can consider increasing your savings when you do return to the workforce, or prior to if you can plan for it, to make up for the difference.
- Review the risk profile of your investments
Many women will often take less risks when it comes to investing, which may in fact be entirely inappropriate for their situation. By carefully reviewing the risk profiles of your investments, and the potential benefits of re-aligning these, many may be in a position to increase the expected returns being generated and ensure their savings are working harder.
- Educate and empower yourself if you’re not working
One of the most powerful steps many expat women can be taking is to continue to learn new or expand on existing skills. This may mean completing a Diploma or Certificate course via correspondence, or some other form of skill development. If you’re unable to work in your new destination, by enhancing your skills and knowledge, this will put you in a much stronger position when you do decide to return to the workforce.
- Construct your financial plan as a family
Ensure that you’re aware of your family’s financial plan and don’t leave all of this to your partner. With divorce being a serious risk for many, it’s important that you know where your investments are and how you are setting out to achieve your financial goals as a family.
- Choose the right financial planner
Of course, I could not create a list of recommendations without mentioning the value of surrounding yourself with the right team of people. Choose a financial planner that explains things in terms you understand and that you’re comfortable with. By partnering with the right financial planner, you can rest assured that if anything ever does go wrong, or not according to plan, that you can pick up the phone to someone you trust who can walk you through all of the relevant financial steps, and assist you along each step.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Adviser with Australian Expatriate Group, specialist division of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian expats in Singapore.
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Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.