Retirement planning: How is it different for women?

What factors have an impact on women’s retirement?

When it comes to retirement planning, women face a number of unique challenges. Here’s what you need to remember to ensure your financial security.

Gender pay gaps, career breaks and part-time work

Even today, studies show that women generally earn less per hour than men. Lower salaries affect women’s ability to save, even more so when a couple’s joint expenses are divided equally. Splitting expenses in proportion to salaries can often be a more equitable option.

Taking parental leave, taking a career break to care for a sick relative or choosing to work part time to look after children are realities that affect women disproportionately. This results in lower long-term income, which reduces not only retirement savings but also contributions to the Quebec Pension Plan (QPP) or the Canada Pension Plan (CPP). Plus, these absences from the job market can have a major impact on career progression.

Longer life expectancy

In Canada, life expectancy is on average four years longer for women. While this may seem like a small difference, these extra years nevertheless require more money in retirement.

Another factor to consider is that the retirement age for women is often younger if they choose to stop working to spend more time with an older spouse who is already retired. Disability and job loss at the end of a career may also prompt women to retire earlier. All of these scenarios can lead to a drop in savings.

At the same time, earlier retirement means many women risk losing years of QPP or CPP contributions. Pension benefits will also be reduced if women retire before age 65. Fortunately, there are still many ways to reach your retirement goals and limit the financial risks of premature retirement.

When should you start planning your retirement?

The good news is that it’s never too late to start planning for your retirement. With a good plan in place, you can maximize your benefits and take advantage of compound interest. The longer your money is invested, the more time it has to grow!

It’s also never too late to enlist the support of specialists who can answer your questions and discuss your concerns and plans with you. Need advice on how to get started? Take a look at our four-step strategy.

How can you determine how much to set aside?

It’s not easy to know how much money you’ll need when you retire. But it’s possible to plan ahead to get a good idea of your financial needs during this period of your life.

Start by determining the age at which you’d like to retire – when you’re 65, earlier, later? Then evaluate the financial resources you’ll need to support the lifestyle you want to pursue. For example, do you want to travel in the first few years, move to the country or buy an RV and tour North America? Maybe you just want to maintain your current lifestyle and enjoy special moments with loved ones.

If you feel you haven’t saved enough for your retirement, follow our advice to make up for lost time.

How should you manage your retirement plan?

Retirement planning is much more than just saving a certain amount each month. It also requires working with specialists who can guide you towards your goals.

You’ll need to take the following six points into account:

1. Time: At what age do you plan to retire, and how many years could it last? Given the longer life expectancy of women, you could be retired for longer than you think.

2. Inflation: This has a direct impact on your purchasing power. In 10 years, it will cost you more to buy the same product or service, so your retirement plan needs to take the rising cost of living into account.

3. Market volatility: Investing money in the stock market for your later years means dealing with market volatility. Brush up on your knowledge – once you’ve retired, you’ll need to review your strategy to protect your money against market fluctuations.

4. Healthcare: In retirement, some expenses decrease or disappear (contributions to pension plans, RRSPs and TFSAs, fringe benefits, etc.), but others may increase, such as health care, housekeeping and exterior maintenance or transportation assistance.

5. Asset allocation: The more you diversify your investments, the lower your risk of suffering significant market downturns.

6. Planning your withdrawals: Should you cash out your TFSA, RRSP or other assets first? How much can you withdraw so that you don’t overspend but don’t deprive yourself either? It’s important to calculate how much you’ll need to withdraw from your investments once you retire. Specialists can help you develop a customized plan.

What sources of income will you have in retirement?

While there are many elements to consider, you’ll have three potential sources of income once you retire:

1. Government pension plans
In Quebec, the Québec Pension Plan (QPP) provides a basic retirement income. If you live outside the province, you’ll receive the Canada Pension Plan (CPP). At the federal level, you’ll also receive the Old Age Security (OAS) pension and possibly the Guaranteed Income Supplement (GIS) if you qualify.

2. Supplemental pension plans (SPPs)
These plans are offered by certain employers. Employers contribute to a pension fund to provide retirement income for their employees. If you benefit from such a plan, find out how it works and the amounts you could receive.

3. Personal savings
Your investments (registered and non-registered) will enable you to supplement the income you receive from public pension plans and any retirement savings plan you may have. This includes RRSPs, which you can contribute to through systematic savings, as well as your various investments and the returns they generate.

Trust yourself! Some studies claim that women are good investors because they’re generally more patient and less impulsive. This normally generates better returns. Don’t forget to diversify your investment portfolio to reduce the risks associated with market downturns and to review your investment strategy as you approach retirement.

Retiring as a couple or on your own?

Couples generally benefit from certain tax advantages in addition to being able to share living expenses. It’s also possible for one person to transfer a portion of their retirement pension to the person with the lower income. This income splitting saves on taxes.

Although the OAS pension and the CPP are paid to each individual, you’ll need to factor in the GIS received by you or your partner, if you’re part of a couple.

Are you a single woman who’s planning to retire on your own? A financial advisor can help you build a plan tailored to your situation. It’s the first step towards a more comfortable retirement.

Are you ready to manage your retirement?

Taking charge of your retirement isn’t as complicated as you might imagine:

• Gather your documents, take stock of your finances and establish your retirement goals and current level of savings.
• Stay informed by attending financial planning seminars and workshops or by consulting online and specialized resources.
• Don’t tackle it alone. Talk to specialists – they’re essential resources – and ask them any question you may have. Remember that whatever the size of your savings to date, their aim is to help you plan for a brighter future.

With a good retirement plan, you’ll be well on your way to making the most of this major milestone and taking care of yourself and your loved ones. Don’t hesitate to contact one of our advisors if you need guidance in making your retirement plan.