Women and retirement: It’s time to take the reins
It's no secret on average women tend to live longer than men. In fact, nowadays it's estimated most Canadian women will live well in to their 80s.
While a long, happy life can be a blessing, it can also present the fairer sex with unique challenges when it comes to their retirement security.
Save early and make a retirement plan
"Getting started as early as you can (with retirement savings), the better it is. Get time in the market on your side and the power of compounding working for you," says Cynthia Caskey, vice-president, Portfolio Manager & Sales Manager, TD Waterhouse Private Investment Advice in Toronto. "Sitting down with a financial advisor to discuss what's important to you and what you want your future to look like is a key first step."
Alarmingly, only three in 10 women say they have a financial plan in place, Caskey says, yet more than 43 per cent of women have told TD they're solely responsible for their household's financial planning and investment decision-making.
Financial literacy first
Marlena Pospiech, senior manager, Retirement Strategy, BMO Retirement Institute in Toronto, says ladies need to be proactive with respect to their financial literacy first and foremost.
"Our studies have shown women tend to be less engaged in financial decisions in their households and that men still take on the primary role in decision-making," she says.
Women also tend to describe their investment style as conservative where as men describe their RSP investment style as more aggressive or growth oriented, Pospiech says.
"That can also hurt women that are trying to save more for retirement. Adopting a more aggressive stance in their investment approach would be beneficial for women. That's important not only before retirement, but during retirement years to offset the impact of inflation."
Though taking a conservative approach to investing isn't necessarily a bad thing, defining and taking the appropriate amount of risk with your investment portfolio can be beneficial.
"When we talk with Canadian women investors, over half agree there are differences in terms of how they approach investing and working with an advisor," Caskey remarks. "They're looking for a different experience most often and they highlight financial education and market information. They really want to feel confident in making decisions. Sometimes it takes a bit longer but we find when we work with women, they're definitely increasing their level of confidence as they go forward."
Lost earning years
Women also more often than not take on the role of caregiver, and as a result, spend time out of the workforce caring for children or elderly parents. Whether it's maternity leave or an extended absence to care for a family member, exiting the workforce means leaving behind a paycheque and often the ability to contribute to an employer-sponsored retirement plan or individual savings.
"Ninety per cent of caregiver situations fall to women," Caskey notes. "And the average caregiver time out of the workforce in Canada is 13 years. Women may be looking at retirement over a course of 20 to 25 years."
Pospiech says accounting for realities such as these within the scope of one's financial plan can help provide an adequate buffer to a lengthy leave of absence.
"Take a look at your expenses and savings and budget accordingly. Are there areas where expenses can be cut? That would allow women to save more for retirement though they may be impacted by intermittent work," she advises. "It's also wise to have diversification within their investment portfolio."
Alone for your golden years
Pospiech also highlights the need for women to realize there's a higher risk that they'll be alone in retirement.
"So much time is spent talking about retirement as a couple but very little time is spent discussing the fact that for women, the widowhood average age is 56," she warns. "Four out of 10 women are also likely to divorce by their 30th wedding anniversary. That could really lead to financial setbacks."
Income inequality
On the subject of equal pay, women have done a lot of catching up but salary or wage discrepancies do remain. But there's good news on that front. Caskey says from 2001 to 2011, wages for women aged 25-54 increased by 13 per cent.
"That's really narrowed the gender/hourly age gap on paid employment. Men during that same timeframe only gained about 5 per cent," she says. "During the downturn, the unemployment rate held up better for women than it did for men."
Another factor that may contribute to this discrepancy in income may be that women tend to impair their earning power by hesitating to ask for and negotiate a higher salary.
"Historically women have been at a disadvantage due to the wage gap," she adds. "Nowadays, more women are feeling more in control of their financial destiny and they're not as reliant on others around them.
"In terms of being savvy, I think a lot of women are quite pragmatic and they realize that they can't rely on others to secure their future."