While men and women are equal in lots of ways, however when it comes to retirement planning, there are some differences that should be considered. Women tend to live longer than men and invest more cautiously, and both factors can have a profound impact on retirement savings if women don’t work to mitigate them.
Female centenarians abound
It’s a well-known fact that Canadian women tend to outlive Canadian men, and more females than ever are now reaching the age of 100. That’s a nod to medical advances and healthy lifestyles, but it also means that more people are living more of their lives in retirement and they need their money to last longer.
The facts about widowhood
“One fact that really shocks a lot of people is that the average age of widowhood in Canada is 56,” says Dr. Amy D’Aprix, a Life Transition Expert and consultant with BMO.
If a woman is widowed in her mid-50s and her spouse was still working at the time, that income disappears immediately. If her spouse was retired and had a pension, the pension payments might end after the pensioner passes. And if the spouse was the one looking after the long-term finances in the family, that investing knowledge can be lost if it wasn’t shared between the couple.
Those factors inform Dr. D’Aprix’s second surprising fact: “Almost two-thirds of women experience a decline in their family income after widowhood,” she says.
The divorce effect
Another event that can have a negative effect on a woman’s finances is divorce. Even though almost 40 per cent of Canadian marriages end in divorce within three decades, according to the BMO Retirement Institute, it’s an eventuality that most people don’t want to think about or plan for.
“We’re talking about a life event that is fairly common for people,” says D’Aprix. “And in the first year after a divorce, a woman’s standard of living drops an average of 40 per cent.”
Plans need to reflect reality
These common facts suggest that women are well served by being financially prepared to live for some years on their own. But the reality is that many women aren’t prepared. According to D’Aprix, 58 per cent of American women in the pre-retirement Baby Boomer cohort have less than $10,000 set aside for retirement – and she’s pretty sure the Canadian figure is similar.
“A lot of women, even if they’re high-level professional women, a lot of times they’re just not dealing with their finances in a way that’s reflective of the reality they might face in the future,” says D’Aprix, whose nationwide seminars aim to help women become more in control of their finances, now and for the future.
D’Aprix advises all women to at least stay informed about their retirement planning, even if they themselves are not actively investing the funds. She suggests a couple reviews their long-term retirement plans and their day-to-day finances at least once a year, so that both spouses know what’s going on in both areas.
Financial plans as GPS
D’Aprix is also a big proponent of having a financial plan, which she likens to the route a GPS device suggests for getting from one place to another. When you save for retirement, you need to know your current financial status – similar to your location on a GPS – and what you want your finances to look like when you retire – like your destination on a GPS.
If you find that you’re not sticking to your plan, D’Aprix says you shouldn’t be embarrassed or ashamed, just visit your financial advisor and recalculate.
“Think about your GPS when you make a wrong turn,” D’Aprix says. “It never yells at you. It never tells you it’s not going to give you directions anymore. It just says: recalculating. And that’s what a good advisor will do with you.”