Featured Article with Fempire, #1 Business Coaching Brand for Female Entrepreneurs and Leaders - Providing the Top 5 tips to planning and managing your future financial independence.
Dated 18th March 2023
Running a successful business can be a dream come true for many women, providing them with independence, accomplishment, and financial security. However, many female entrepreneurs tend to neglect their personal finances, especially their retirement planning. This can lead to financial insecurity and hardship in their retirement years.
It is important to understand what retirement planning and funds are and why they matter. Retirement funds are focused systems and funds that helps you save for retirement by setting aside a portion of your income throughout your working life. Your retirement fund contributions are invested by a fund manager, and over time, they grow to provide a source of income in retirement. Governments provide tax incentives to encourage people to save for retirement through these specialised funds, making it a tax-effective way to build wealth over time.
Across the world, retirement funds are known as many different things, Super, pensions etc and the specifics of each system varies greatly. Below is a brief overview of some of the retirement funds around the world;
Australia we generally refer to them as Superannuation funds both employer/industry managed as well as self-managed.
United States commonly refer to their retirement funds as 401(k) plans or individual retirement accounts (IRA’s).
The United Kingdom have a basic state pension, but many individuals also participate in private pensions
The Canadian government provides the Canada Pension Plan, with many employers also offering supplementary pension plans
Japan has employer-sponsored plans or government-run pension systems, and
Germany retirement benefits are provided through a combination of public and private systems
Retirement planning is an important consideration for everyone, but particularly for small business owners and entrepreneurs and to be even more specific it is paramount for women to prioritise their future financial security
The current retirement planning funds fail to appropriately address the gender inequality that exists when it comes to retirement savings. Women, in particular, are at a disadvantage due to a variety of factors that leave them with far less available finances in retirement than men.
The gender gap is a significant issue. Women currently retire with on average, just over half the amount of available finances that men do. This disparity means that women are more likely to face financial hardship and poverty in retirement, with many struggling to meet basic living expenses.
Women currently retire with on average, just over half the amount of available finances that men do.
There are 3 main reasons for this gender gap in retirement savings:
The gender pay gap remains a pervasive issue. Women on average, earn less than men, which means they have less money to contribute to their retirement accounts. Over a lifetime, this disparity can lead to a significant gap in retirement savings
Women are more likely to take career breaks or work part-time to care for children or elderly relatives. This time away from work means they are not earning or contributing to their retirement funds, further widening the retirement savings gap
The retirement fund system itself has been designed with a male workforce in mind/ Women, who often work part-time or casual roles, are not always eligible for employer contributions, which again exacerbates the gender gap in retirement savings.
As a small business owner or entrepreneur, you may not have access to the same retirement benefits as employees of larger companies. This means that you have an even greater responsibility to make sure you’re saving for retirement through focused retirement planning and as such it must be considered a vital element in your financial planning strategy. Unfortunately, many female business owners or entrepreneurs do not prioritise their OWN future financial needs, which can lead to financial insecurity and hardship in their retirement years.
Many studies have shown that women who own small businesses miss out on savings for retirement at a significantly higher rate than their male counterparts. The main contributing factors to this disparity are known to be:
Women often prioritise investing in their businesses and the well-being of their families over their own retirement savings
Women are more likely to tailor their business to work part-time or even take career breaks to care for children or elderly parents
Many women-owned small businesses are in industries that traditionally pay lower wages, have lower price points, and offer fewer benefits such as retirement planning
As a small business owner or entrepreneur, you have a responsibility to provide for your own retirement, just as much as you do for your employees. However, it is easily overlooked when you’re focused on day-to-day operations and trying to grow your business.
Finally, here are my top 5 essential pieces of advice for female entrepreneurs and business owners to make retirement planning a priority:
Research your options and Invest in the Right Fund: There are a range of retirement management funds available, so it’s important to do your research and find the one that is right for you and your business. Look for a fund with low fees, strong past performance and investment returns, investment options, and good customer service.
Seek Professional Advice: Seeking the advice of a financial planner or accountant can help you make informed decisions about your retirement planning
Start Early: Time is the most significant factor in building up a comfortable retirement savings balance. Starting to contribute to this as early as possible is essential, as it allows you to take advantage of the compounding returns.
Make Regular Contributions: Contributing regularly, no matter how small the amount may be, is a great way to build up your balance over time. Make sure to contribute consistently to your retirement savings account to ensure a comfortable retirement. This will also make it easier to manage your cash flow.
Take Advantage of Tax Benefits: Contributing to your retirement fund provides tax benefits that can help reduce your taxable income. Make the most of these benefits by Maximising your contributions.
It may seem daunting to put aside money for the future, but it is essential to remember that retirement planning is a long-term investment in your financial future. It’s important to understand the retirement options available in your own country and to plan for retirement accordingly. By being a small business owner or entrepreneur who prioritises this, YOU can ensure that you have taken the steps needed to secure a comfortable retirement, financial independence, and security for the future.
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