Help Women Plan for Retirement Shortfall

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Kathleen Woodard, senior vice-president, CIBC

When thinking about how to provide the best kind of financial advice to women, there’s a few factors that advisors should take into consideration. There was a recent CIBC poll that found that men and women both make financial sacrifices to care for loved ones, but we actually found that women take the lion’s share of those care responsibilities and actually often take the greatest financial hit. In fact, many more women than men put their careers on hold, reduce hours, or give up advancing their career to care for kids, and it’s actually not just childcare. We’re seeing a growing number of women that make similar sacrifices later on in life to care for a spouse, an aging parent, or even a sibling, and so, of course, this has a direct impact on women’s earning power and savings. In fact, almost one in three women say they’ve reduced or stopped saving as a consequence of childcare or eldercare, and so this puts women at a considerable disadvantage when it comes to saving for their retirement.

In fact, our study revealed that women over the age of 55 have saved less than half of what men have saved. Yet, women live longer, they’re likely to face higher healthcare costs, and that actually means that they’re going to have to make more from less. So, all of this adds up to the fact that women need to think about planning for retirement differently and adopt different strategies. But the good news is that while the vast majority of women say they’re jumping into the driver’s seat, they are taking more control of their finances and especially the older that they get. The study also showed that they need to receive some help in terms of investing with confidence and get started earlier and take some steps to tackle any savings shortfall.

When it comes to actually thinking about specific advice that our advisors can provide to women, there’s a few things to think about. So, if we know that women are going to be more likely to take leaves or to put their careers on hold while their kids are young or if they’re caring for an aging parent, we also know that we don’t plan well for those unexpected curve balls when it comes to that kind of healthcare. So, there’s a few things to consider.

Number one, think about making sure that we’re providing advice about ramping up on contributions early if we can, or for married couples think about the advantages of a spousal RRSP and making sure that you’re actually thinking about a spousal RRSP, obviously great way to equalize retirement savings later on. And, obviously, the benefit is that the spouse can use some of their contribution room in their RRSP and get the deduction in their name, but make the contribution in the woman’s name. This helps to balance out savings with income splitting opportunities down the road, so that you pay the least amount of tax possible in retirement.

Another thing to think about is that the study also showed that women tend to be more conservative investors. We know that women have a little less confidence as they showed in the poll than men do when it comes to investing, but as advisors, we really need to build that up. Speak in plain language, don’t use jargon, and really help to show how investing for the long term is going to help our female clients with their goals later in life and how it impacts their family and the goals that they want to achieve. So, if we know that women tend to be a little bit more conservative investors, I think it’s really important the role an advisor can play at that time to help walk them through the benefits of investing regularly and in a well-balanced and well-diversified portfolio, and so really talking through the merits of asset allocation and making sure that equities are an important component for a long-term investment plan and obviously emphasizing about the benefits of making sure that women are taking advantage of the years of contribution, the earning potential for the long term.

A third thing to think about for advice for women is thinking about making sure they’re taking advantage of how to share or split costs. We’re actually seeing more young people, couples now splitting parental leave to limit the career impact on one spouse alone and also to take advantage of dual employer benefits. So, if you’re caring for an aging parent, obviously, we want to make sure that they consider some of the tax credits available, like the Canada caregiver tax credits that they might be able to take advantage of. Those are a few examples of great advice that advisors can give specifically tailored to women as they think about their financial future.