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Being a Female Millennial: Chronicle of an Expensive Retirement

By Norma Briz - Fintual Mexico
General Director


Norma Briz By Norma Briz | General Director - Wed, 03/08/2023 - 09:00

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Being a millennial woman in Mexico implies the liability of taking care of my own retirement, like almost anyone else of my generation (in fact, also some of the Gen X).

A few years ago I realized that I should have started saving for my retirement much earlier than I did —I mean, in addition to the contributions that I made to my retirement plan account (AFORE) for more than 20 years. 

Why is that? Not only because I am  among  those generations that will retire under the defined contribution retirement system but because of additional factors, such as being a woman.

It’s a Fact: GenX, Millennials Have to Invest More

In 1997, due to the pension system reform in Mexico, we passed from a defined benefit system of lifetime pensions (with resources coming from a common fund) to a contributory pension in which each person has an individual account. 

The resources accumulated will have to support our retirement, and it’s well known that a contribution of 6.5% of our salary will not be enough: with such contributions we would have an average replacement rate of around 30% of our last salary.

At that time, overnight our income will be 70% less than what we were used to.

Recognizing the retirement situation that we’ll face (especially Gen X and millennials), the Mexican government announced a new reform in January 2021 that proposes a gradual increase between 2023 and 2030 in the contributions to the individual accounts, reaching up to 17.2% of a person’s salary, and causing the average replacement rate to increase to approximately 65% of the last salary received. 

This measure undoubtedly improves the retirement situation, especially for the new generations who join the labor force or who have done so in recent years, but this reform does not solve the challenges that Mexicans will face in order to live and maintain their retirement.

The expectation is that these generations will receive around 35% less than their last salary, and the replacement rate will be even lower to the extent that more years have been contributed under the percentages of the 1997 reform and with higher incomes. 

Retirement Costs More for Women

I’m part of the generation that did not reach the benefits of the old pension system prior to 1997, and I will not reach the advantages of the increases in the contributions of the 2021 reform either, due to the mere accident of the time in which I have been employed and economically active. 

But this is not the only challenge I have to consider for the retirement I want. There is another factor that is much more evident and which is talked about in very few forums and consequently may have less awareness and action: iIt is that I am a woman.

The cost of living for the simple fact of being a woman is higher than that of a man.

According to the document Statistics About International Women’s Day (March 8), issued by the National Institute of Statistics and Geography (INEGI), the economic participation rate of women has grown in the last decade, but despite that, women continue to experience more interruptions in their work life at different periods of their lives. 

This causes more intermittency in the contributions we make to our individual retirement accounts, of course. And if we add to this the gender wage gap, it is evident that these are factors that have an impact on the decrease in the average replacement rate for women.

On the other hand, according to INEGI, we observe that the average life expectancy of women in Mexico is 77.7 years, and 73.0 for men. If we take this data to urban areas, both the life expectancy and the gap widen even more.

But not only do women have to save more because we will probably live longer, but we also have to consider that the cost of access to healthcare for women is higher, and not only because of the lack of continuity of contribution that gives access to the public health system, causing women to have to pay more frequently for medical consultations, medications and laboratory results.

According to data from Economic Situation and The Sector Monthly Report published in March 2022 by the National Insurance Commission (CNSF), women pay up to 42% more in premiums for major medical insurance than men.

Few Retirement Alternatives 

A challenge facing the financial industry (particularly those entities that focus on the development of voluntary savings and investment products) is that we have to be an affiliate to and complement the mandatory retirement savings system, designing flexible products that provide access to tax benefits that optimize returns (such as the Personal Retirement Plans, better known as PPR in Mexico).

This is in addition to  having to adapt not only to the different stages and circumstances of life, but also to generational and gender perspectives, and even covering other perspectives not addressed in this article, such as the occupational element as an entrepreneur, trader or businessperson, among others.

Due to technology, companies like  Fintual,  can expand the offer in the Mexican market, and become an alternative to those institutions (mostly insurance companies) that for years have been the only option, with their inflexible products, forced terms, high costs (some hidden or not transparent) and heavy penalties.

Photo by:   Norma Briz

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