Deka economist Dr. Gabriele Widmann on female thinking traps when it comes to private pension provision.
One in four women in Germany has not yet done anything to secure their future financially. In an interview, Deka economist Dr. Gabriele Widmann gives reasons for women’s reluctance and tips on what women should look out for when investing.
Interview with Dr. Gabriele Widmann Deka economist
In this country, men receive on average twice as much pension as women. Today, however, many more women are working than in the past. Will this mean that the pension gap will close automatically in the future?
Dr. Gabriele Widmann: No, the pension gap will continue to exist for a long time. Even if the classic housewife model has become rarer, many women take a few years off work when they have children and then return to work only part-time. This means they have lower entitlements in the statutory pension scheme than men and women who work full time throughout.
In addition, women still receive lower salaries on average than men, not least because they often choose the lower-paid professions, for example in the social sector. This is another reason why their pensions are lower later on. Very few women are aware of this.
What advice do you have for women?
Women should not hope that somehow it will be enough. Nor should they trust that they will have sufficient financial security through their partner later on. My advice to women — and men, too, by the way — is to take their old-age provision into their own hands and make private provision.
According to studies, only one in three women provides for her own retirement. What’s stopping the rest of the women?
Women don’t like to think about getting old and therefore don’t take enough care of their financial situation in old age. At information events specifically for women, I often hear the excuse that the securities investments I prefer for long-term provision are so uncertain at the moment and that saving for retirement would be useless anyway. But when I ask them about alternatives, they don’t have an answer either.
In addition, many women tend to take care of everyone else first before thinking of themselves. For example, the children’s education or major purchases for the family take priority. When it comes to retirement planning, women should develop a healthy egoism that makes them more financially independent. After all, they don’t want to be dependent on the support of their children in old age.
Do women have to invest their money differently than men?
The rules for successful investing apply equally to women and men, of course. But it’s no secret that the topic of finance tends to excite men more. That’s why Deka and the savings bank are trying to get women interested in the topics of finance and private provision. We don’t want them to regret later that they didn’t make enough provision. In our personal advisory services, too, we make it clear how important financial independence is for women in old age.
What should women look out for when investing?
Investing wisely is not all that complicated if you take three things to heart:
1. never put all your eggs in one basket, but spread the money you invest over several types of investment. For example, with broadly based investment funds that also invest in different types of investment such as shares, fixed-interest securities and real estate.
2. when choosing investments, pay attention to the expected return: Of course, securities and therefore mutual funds are subject to fluctuations in value due to the capital market, which can have a negative impact on the investment. But if you currently want to compensate for inflation and taxes, you should be able to generate a return of around three percent a year. For such a return, you have to dare to take a bit more risk, but this is well tolerable with a longer investment horizon.
3 Those who start their retirement planning as early as possible benefit the most from the compound interest effect. The earlier you start, the less you have to set aside each month to save an adequate sum for retirement. By investing regularly, you also save yourself the time-consuming task of wondering when is the best time to invest. This is rarely the case anyway.
Good advisors pay attention to these things. It’s best to make an appointment with your savings bank right away and start thinking about retirement planning.