Women's financial future could be at stake due to a simple decision: choosing the wrong KiwiSaver fund. Here's why it matters and how to make the right choice.
The Gender Gap and the Risk Factor
The gender pay gap is a well-known issue, but it's not the only factor affecting women's financial security. Westpac's research reveals a surprising twist: women tend to opt for less risky KiwiSaver funds, which could cost them tens of thousands of dollars over their lifetimes. While men contribute and save more, women live longer, and this combination can lead to a significant financial disadvantage.
The Numbers Speak
Let's dive into the numbers. On average, men have higher balances in Westpac KiwiSaver funds across all age groups over 18. The gap is most pronounced in the 30-39 age group, where men's average balance is $28,992, compared to $21,740 for women. This difference highlights the impact of riskier investment strategies.
Why Less Risk Equals Less Reward
Westpac's Sarah Hearn explains that women's preference for moderate or conservative funds might be a result of the gender pay gap and time out of the workforce. However, this approach can limit their long-term gains. Aggressive funds, which are higher-risk, have historically delivered higher returns, averaging 9.5% annually over 10 years, compared to 4.2% for conservative funds.
The Cost of Conservatism
Here's the controversial part: women's conservative strategy could cost them. Over 30 years, the difference in outcomes between a conservative and a growth fund could be over $225,000 for someone contributing 6% of their income. Hearn emphasizes that women should consider their long-term goals and risk tolerance when choosing funds.
Taking Control of Your Financial Future
So, what's the solution? Hearn encourages women to take control of their financial destiny. She suggests reviewing their KiwiSaver fund choices and ensuring they align with their risk tolerance and time horizon. By embracing a more aggressive strategy, women can potentially make their money work harder for them in the long run.
Breaking the Money Talk Barrier
Hearn also highlights a crucial aspect: women need to start talking about money. She notes that men are generally more comfortable discussing financial matters, and this could be a missed opportunity. By openly discussing KiwiSaver balances, returns, and fund types, women can make more informed decisions and potentially close the financial gap.
Take Action, Not Risk
In conclusion, the key takeaway is simple: women should consider taking a bit more risk with their KiwiSaver investments. It's about balancing risk and reward to secure a comfortable retirement. Remember, it's never too early to start planning, and small adjustments now can lead to significant financial gains in the future.
