Gails Blog

A while ago I asked what topics you wanted to hear more about and I got this from Mary:

Topics of interest are women and investing. My husband has a great pension (he’s a teacher) and doesn’t think it necessary to put money aside elsewhere but I want something of my own. His pension is only good to me while he is alive. I can’t survive on a survivor’s pension. Also, we ladies know that “a man is not a plan”. What should I do on my own in terms of retirement savings and insurance.

So, first, kudos to you Mary for recognizing that “a man is not a plan” and that you need to have your own retirement assets. Tell your husband that you don’t relish the idea of living on kd and wieners when he’s off with the angels and you’re left living on a third of his pension (if that!)

Women face some unique challenges when it comes to retirement planning. I talk about these in A Woman of Independent Means, but I’ll plant some ideas here for you:

• You’ve heard me say, “Men die; women get sick.” That’s a reference to the fact that women live longer than men. On average about seven years longer. So our money has to last longer. And since those last seven years will likely also have some medical costs, those last seven may be very expensive years.
• Women earn less than men. Despite all the progress we’ve made in the workplace, we’re still not at parity. And we’re more likely to work part-time. Did you know that 40% of jobs held by women are considered to be non-standard (part-time, contract, temporary) with few, if any, benefits. So we have to put aside a larger percentage of our income to have enough for the future. Or we have to start earlier to put compounding on our side. Or we have to be more aggressive in terms of the investments we choose.
• Women tend to be more risk-averse. I explain why in A Woman of Independent Means. It’s anthropological. It’s dangerous. It means our money doesn’t get the chance to work as hard as it may need to, depending on how much we’re socking away. This despite the fact that women tend to be better at investing than men.
• Women are also more likely than men to take time out of their careers to raise their kids or look after elderly relatives, further reducing their incomes and retirement savings. This also affect their government pension benefits. The average CPP pension for dudettes in October of 2005 was just $334 - a mere  63% of the $527 received by the average dude.

So what do you do if you’re a Goil trying to build a future plan?

Prioritize saving for the future. Unless you plan to throw yourself off a bridge when you hit retirement, you’re going to need enough money to see you through what could be a looooong retirement. And if you’re counting on government benefits, give your head a shake. If you combined your Old Age Security, Guaranteed Income Supplement and the average woman’s Canada Pension Plan benefits,  in 2007 you would have had a whopping $1260 a month!

Keep working to upgrade your skills. Ask for promotions. Don’t be shy about finding ways to increase your earning potential. Sock away what you can - not to the point where you’re having no fun in the present - with a view to ensuring you have a tidy nest-egg come time to hang up your high heels. While you’re studying to upgrade your work skills, study to upgrade your money management skills too. You have to learn what’s available to you, become comfortable with the options, and take advantage of some of the alternatives to really make your money sing.

It doesn’t matter if you’re more risk averse as long as you KNOW you’re more risk averse because then you can do something to counter-act your natural tendancy to duck and hide. Get together with friends from work or other moms or your family members and form your own investment club. Help each other learn. Help each other grow your money.

Don’t let anyone convince you that you don’t need to have your own retirement plan. You do. If you’re a stay-at-home mom and you don’t have any money of your own right now, tell The Hubster you want him to contribute to a spousal RRSP for you. He’ll still get his deduction and you’ll have assets growing in your name. If he balks because he thinks you’re just into him for the money and you’ll dump him when he makes you rich, tell him if you decide to dump him you can get half his retirement assets anyway, so that argument holds no water. Income splitting at retirement time makes good financial sense and that means you each need your own pool of retirement assets.

The time to start planning for retirement is TODAY. Quit fooling around on the net and go open up an RRSP!

 

This entry was posted on Saturday, May 17th, 2008 at 10:24 am and is filed under Retirement Planning. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.