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A woman’s retirement: 30 per cent less in savings than men on average, which means a lower annual income and a worse standard of living.

Particularly since the pandemic began, there’s been a lot of discussion about the disadvantages faced by women in the work force. They’re paid less on average, they have more career interruptions to raise children or act as caregivers for family members, and they’re more likely to work in jobs affected by the lockdown to fight COVID-19.

A new study by the retirement and investment consultants at Mercer Canada tallies up the financial cost of these disadvantages after women retire. Mercer found that recently retired men had an average balance in their defined contribution pension plans and group registered retirement savings plans of roughly $100,000, which suggests women had $70,000.

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The findings send a strong message to women in the work force about demanding equal pay and then making sure they are saving at least as much as men and, preferably, more. “It’s really important for women to improve their overall financial confidence,” said Jillian Kennedy, a Mercer partner and leader of the firm’s Financial Wellness business. “Make sure you’re saving more and, if you’re not, understand how that will impact your life.”

One piece of good news for women in the Mercer study can be seen as encouragement for them to engage with their investments. On average, women had slightly better investing results than men.

Mercer looked at 14,000 accounts held by recent retirees who were part of DC pensions and group RRSPs, where workers and employers make contributions into investment funds to be used for retirement purposes. One big reason why women end up with less money in retirement is that they have a lower savings rate.

Data collected by Mercer show men contributed 9.86 per cent of their base pay on a gross basis to their workplace retirement plans, while women contributed 9.05 per cent. Essentially, women are choosing to save less of their pay for retirement than men.

This may be related to familial responsibilities for women as parents and caregivers, Ms. Kennedy said. “Some of it could be related to anxiety or fear – ‘What if I [invest] the money and I need it? What about my short-term security?’”

Combined with longer lifespans, the lower savings rate means that women need to work two years longer than men to be ready for retirement. Mercer defines retirement readiness as having enough retirement income to replace 70 per cent of your working salary and not outlive your savings.

The extra two years of work is an optimistic take that ignores other factors in play for women that can leave them further behind men in saving for retirement. “Pay equity plays a big part,” Ms. Kennedy said. “If women aren’t earning as much, they’re not able to save as much.”

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As reported recently in The Globe and Mail, a survey has shown that female lawyers working in corporate legal departments earned 11 per cent less than male counterparts on average last year. A study from last year showed women earn an average 12 per cent less than men one year after graduation, and that the gap widens to 25 per cent five years after graduation.

The Mercer study points out that women are also much more likely than men to face career interruptions for family-related reasons, a situation that is becoming more pronounced in the pandemic. For example, taking time off to care for a relative who is ill with COVID-19 or to supervise children who are at home and learning virtually instead of attending school.

Ms. Kennedy said the pandemic focuses attention on the short term rather than on future financial security. “There’s a major distraction around what people need today and what they’re able to control,” she said. “Not only are women out of the work force, but their long-term perspective is gone.”

One thing women have going for them is a steadier hand as investors. In the accounts Mercer looked at, women made one-tenth of a percentage point more than men on an annualized basis. “Women invest in a diversified portfolio and don’t mess with it,” Ms. Kennedy said.

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