After mid-November last year, women across New Zealand were effectively working the rest of the year for free.

That’s because the country’s gender pay gap sits at around 9.2 per cent, translating to women working for free for around six weeks every year, compared to their male counterparts.

More devastatingly, this gender pay gap has huge implications for women’s finances in retirement.

So, how can women set themselves up, to enjoy a more comfortable retirement?

The retirement gap

There is some good news for women, but is it really bad news? The good news is that women are living longer than men, on average.

The bad news is they’ll be retired for longer, so they’ll need more money to fund those extra years.

Calculations by the Human Rights Commission say because women earn less than men, over a career that would equal an estimated deficit of NZ$600,000.

If they’d put that amount into KiwiSaver, or invested it elsewhere, the deficit could be even higher in terms of lost returns.

The investing gap

Women’s KiwiSaver balances are 28 per cent lower than men’s, ANZ research suggests.

There are more women enrolled in KiwiSaver than men, but these accounts are more likely to be in conservative and low-risk fund types, the bank says. This means their returns are probably less than men’s.

According to Financial Markets Authority research, women are also less likely to have financial investments outside KiwiSaver.

This might be because women are less confident and rate their level of finance knowledge lower than men.

Research tells us that when women do invest at appropriate risk levels, they tend to do better than their male counterparts.

Motherhood sets women back

If you’re a mother, you likely took a year off. Or if you’re from the older generation, you might have taken 10 years off.

Research last year by the Ministry of Women shows you are probably disadvantaged by that. Women’s hourly wages drop on average 4.4 per cent after they have a child. If a mother takes longer than a year to get back to work, the decrease is higher still, at 8.3 per cent.

The ministry says there could be several reasons for this:

· It could be “depreciation of human capital while on maternity leave”.

· Mothers could be more likely to trade higher wages for flexible working hours.

· They may suffer reduced bargaining power after they re-enter the workforce.

Relationship break-ups

Both partners suffer financially after a divorce or if their relationship breaks down. However, women can often find themselves on the back foot financially for longer.

If the woman has taken time out of the workplace for motherhood, her retirement savings, like KiwiSaver, could be significantly less.

She might be paid out by her partner to cover loss of earnings, but she could still end up worse off financially.

Perhaps she’ll need to buy another house in a worse area, or may be reduced to renting.

And, if her partner was the main breadwinner of the house, she might have given up her career to support the household. She might even have been semi or fully retired, but need to start working again.

Women are wise to prepare for any and all eventualities, including separation, divorce, or even the death of their partner, because many women end up financially disadvantaged after a relationship ends.

How women can bridge the gap

· Start thinking about your retirement now. What lifestyle do you dream of after you stop work?

· Think about how much you’re spending and calculate a ball-park figure of what you’ll have at 65. Take steps early to ensure you reach your retirement goals, but keep in mind that exact planning is near-impossible.

· Sort out your KiwiSaver account. Check you’re in a fund that’s suited to your life stage and how comfortable you are taking risks. More aggressive funds might earn better returns, but come with higher risk. Check how much you’re paying in fees and if you’re getting value for money.

· Try to contribute more to KiwiSaver. Do some calculations and, provided you can afford it, see if you can put more into your KiwiSaver account, or other retirement savings. The more you put in now, the easier things could be later in life.

· Know your value in relationships. You might have taken five years off work to raise a family, while in the meantime your partner’s retirement savings has kept growing. Have an honest discussion with your partner – perhaps you could split his savings into two KiwiSaver accounts while you’re raising the kids, so your balances are more even.

· If you’ve got an inheritance or something else you want to safeguard, look at a taking out a contracting-out (prenuptial) agreement.

· Women are less likely to push for a pay increase, or apply for a promotion. Have an open and honest conversation with first yourself and then with your employer. Money talk is tough, but you owe it to yourself to help close the retirement gap. You can do it!

Published 29 February 2019

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.