Investment tips for older women

The theme for this International Women’s Day is #EmbraceEquity, which highlights the need for long-term sustainable solutions that help address imbalanced social systems.  

It’s no secret that women retire with fewer savings than men, making investment tips for older women valuable retirement tools. 

On average, women retire with almost a quarter less in their super funds than men. Gender pay gaps, raising and supporting families and, later in life, perhaps caring for parents, partners and loved ones all contribute to smaller nest eggs when women reach retirement. Women are also more likely to do casual or part-time work in between these ‘duties’. 

In short, the superannuation system disadvantages women who move in and out of paid work. 

There is strong support to change the system. However, calls for the government to assist with compulsory contributions during maternity leave and to bridge the gender pay gap leave little solace for older women – retired or otherwise.  

So, how can older women give themselves the best chance at making their savings last in retirement?

The first step is to empower yourself with financial knowledge.  

This includes general money management, learning automation tools, and investment categories and strategies. By attaining a sound level of knowledge, you’ll be able to evaluate financial advice and make more informed decisions regarding money.  

The good news is that there’s a plethora of helpful information available in various formats – from articles and fact sheets to performance reports, videos and podcasts.  

Choose an investment strategy

YourLifeChoices research conducted on behalf of Betashares shows that 28 per cent of female respondents already have investments in the share market outside of super.  

Most invest for retirement income purposes, while more than a quarter are still building a nest egg. More than 48 per cent of female participants with investments outside of super plan to retire in the next 12 months. Around 60 per cent of them have already adjusted their portfolio in preparation for retirement. 

Those yet to dip a toe in the market will need to decide whether to keep savings in super or switch to a conservative investment strategy. Investor platforms can be especially good for women starting their investing journey. 

The number of women ​​​​using the Betashares platform increased 60 per cent in the past 12 months. Women now make up 41.6 per cent of Betashares’ investors. 

YourLifeChoices research shows that 36 per cent of female investors invest in a mix of direct shares and ETFs, while 58 per cent have direct shares and 5.5 per cent invest solely in ETFs. 

Female investors are using ETFs as building blocks for their increasingly sophisticated investment portfolios, Betashares CEO Alex Vynokur told the AFR

“We’re seeing women use ETFs to invest in international equities, with technology and ethical tilts, as well as broad exposure to Australian-listed companies. The fact that you can gain exposure to these investments in one trade is a key reason why ETFs continue to grow in popularity among investors from all walks of life,” he says. 

“As more women use ETFs to build and grow their wealth, we predict there will be parity in the number or female and male investors in the coming years.” 

Diversify your investments

The trick to long-term investment success is portfolio diversification. That’s because financial markets fluctuate over time. To help balance your portfolio and hedge against potential losses, you should consider a variety of asset classes such as stocks, bonds, and other investments that perform differently as markets change. 

By investing in ETFs, which offer exposure to a basket of investments, you’ll already be diversifying. In fact, diversification is the main reason women invest in ETFs, followed by simplicity and cost-effectiveness. 

Diversifying a portfolio is more important for over-60s. It’s when many investors consider shifting towards consistent yield and lower risk because they have less scope to handle higher risk and, as they approach retirement, less time to recover from losses. The aim with diversification is to decrease your chance of big losses and increase investment stability to ensure a more reliable income stream. 

Betashares’ range of funds cover all the major asset classes, including Australian shares, international shares, cash, commodities and currencies.   

Manage portfolio risk

Even seasoned investors are wary of volatile markets. Volatility can be particularly detrimental for older individuals who may not have the time to ‘ride out the storm’ and recover from losses, and who increasingly rely on their portfolio to fund their lifestyles.  

Betashares’ Managed Risk series aims to defend against market losses while still aiming to provide exposure to the growth and income potential of Australian or international shares. 

Investing through inflation

Inflation may challenge investors for the foreseeable future, but there are ways to mitigate it.  

Long-term bonds can be susceptible to inflation. However, short-term bonds and investments with high pricing power may help to protect your investments from inflation. 

Focus on high-yield performers

To grow your investments faster as you near retirement, you may wish to find ways to maximise income and franking credits. 

For investors in pre-retirement and retirement modes, franking credits are particularly valuable and can often boost income from Australian shares. The Betashares Australian Dividend Harvester Fund (managed fund) (ASX: HVST) aims to maximise the income (including franking credits) available from large-cap Australian shares, making it an interesting opportunity for retirees. 

Investments with moderate dividend yield may also help you to live off dividend income so you can leave the bulk of your investments in the market.  

Age Pension eligibility

You may be able to have some investments and still claim the Age Pension. To be eligible for the Age Pension you must be 66.5 years or older and meet certain asset and income thresholds. 

Even if you don’t qualify for a pension, you may be eligible for a Commonwealth Seniors Health Card or other benefits. The YourLifeChoices Age Pension essentials page can help you find possible entitlements. Every little bit of cash counts.  

Budget and save

Once you near retirement, it’s time to focus on saving and budgeting. Figure out how much you’re spending now and how much you will need to spend during retirement. There was once a rule of thumb that you’ll need around 75 per cent of your current annual working income to live the same lifestyle in retirement. The truth is it differs according to the lifestyle you wish to lead.  

Check out the YourLifeChoices Retirement Affordability Index™ for the most accurate cost of retirement figures, according to your situation, or try one of the many online retirement lifestyle calculators. 

Disclosure: Betashares is a YourLifeChoices partner. All content on YourLifeChoices website is of a general nature and has been prepared without considering your objectives, financial situation or needs. It has been prepared with due care, but no guarantees are provided for the ongoing accuracy or relevance. Before deciding based on this information, you should consider its appropriateness regarding your own circumstances. You should seek professional advice from a financial planner, lawyer, or tax agent in relation to any aspects that affect your financial and legal circumstances. 

Are you an older woman looking for investment tips? Why not send your question to us at [email protected] or share it or other tips in the comments section below? 

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