Rethinking retirement planning for women

In a recent survey by BlackRock, only 41% of Canadian women know how much money they need for retirement, while 51% of Canadian men know the same figure. This 10% gap between genders speaks to a need for more retirement planning services that are tailored specifically to women.

Women are more likely to outlive their savings; they are also much more likely to be overly cautious with the same savings, to a degree which can affect their retirement plans. According to a survey by Desjardins Wealth Management in Quebec, 31% of women were reluctant to take risks with their RRSP investments – a move which would net them lower returns over time and leave them with a diminished nest egg.

Women are also more likely to focus on debt reduction than retirement planning, when they should be both paying down debt and saving for retirement concurrently.

Women still live longer than men

While the life expectancy gap is closing between genders, the latest reports from Statistics Canada put life expectancy for women at 83, and men at 79. This means that women have to plan for at least four more “extra” years in retirement. Plus, these numbers are from 2009; by the time women reach retirement age, there will likely be advances in medicine that will promote further longevity.

A woman’s increased life expectancy is at odds with average earnings compared to men when it comes to retirement planning. On the whole, Canadian women earn 25% less than men do. So not only are women looking at funding extra years, you’re looking at doing it with 25% less than the average Canadian man. Women also face more work interruptions due to maternity leave if they choose to have children, and are more likely to give money to family members in need.

What would women-only retirement plans look like?

In a perfect world, we wouldn’t need to attach a gender identity to a retirement plan. If you walk into a financial planner’s office, they will always offer you the best advice for your situation, no matter what gender you are. But the key for women seems to be increased education on understanding risk and returns in investment, as well as the necessity to both pay down debt and save.

Men could definitely use the same education, but this may be something that financial planners want to put front and centre with a female client. However, it’s a fine line between offering something that speaks to the financial needs of women without being discriminatory in nature. Women who work hard for their money expect to be treated as equals when they invest it. A focus on increased financial literacy for retirement planning as opposed to the treatment they receive at a financial planner’s office would be less likely to tread this fine line.

Reverse mortgages can help soften the blow

If a woman enters retirement without the required amount to take her through her golden years, and owns her own property, she can use a reverse mortgage to help stretch her retirement nest egg. There are no monthly payments and the reverse mortgage only needs to be repaid when her house is sold. The only necessity is that she stay in the property that the reverse mortgage is held on, so any moves or changes should be made in the early years of retirement to ensure that she is in the property she wishes to stay in.

For more about reverse mortgages, contact Horizon Equity today.