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Are women lagging in retirement planning?

Research shows that women are often less prepared for retirement than men. But as more women take the reins, advisors can help them get on track.

By: SHANNON MONEO

Date:July 7, 2016

A milestone birthday jolted a Vancouver Island woman into a new career and an overdue assessment of her retirement plan.

“It was a wake-up call when I turned 50,” says Diane Bernard. “I called an old friend and asked, ‘Where will I land?’ So, I started a business to help build my pension.”

Ms. Bernard, 63, is the owner of Seaflora Skin Care Inc., a company based in Sooke, B.C., that makes body products using wild seaweed. Quick growth from sales across Canada, the U.S., the U.K., Taiwan and China has helped Ms. Bernard reshape profits into a retirement fund. She also expects to reap further financial benefits when her succession plans emerge.

“I’m optimistic that my hard work over the past 12 years will see me through. I have options. That’s very nice,” she says.

It wasn’t always that way.

Prior to launching Seaflora, Ms. Bernard was a municipal politician who, unlike provincial or federal politicians, didn’t have an employer’s pension plan. Her husband had a workplace pension, but she wasn’t content to sit back, waiting to collect. As Seaflora blossomed, Ms. Bernard sought investment and retirement advice from two professional sources.

“It was still really important to me that I had my independence,” she says.

While women like Ms. Bernard are taking the initiative and planning for the future, women in general often lag behind their male counterparts when it comes to investing for retirement.

“Research from Sun Life’s Canadian Unretirement Index in 2013 shows that women aren’t preparing for retirement as well as men,” says Kari Holdsworth, vice-president of individual wealth at Sun Life Financial in Waterloo, Ont. “Saving for retirement is a top priority among many more men, and men are more likely to be satisfied with their retirement savings.”

As well, according to the 25th Annual RBC RRSP poll, 75 per cent of women said they didn’t have a savings goal for retirement, compared to 62 per cent of men. A recent UBS Investor Watch survey found that for couples, only 16 per cent of financial decisions are women-led, compared to 40 per cent of man-led decisions. The remaining 44 per cent of financial decisions are either shared or separately decided.

Ms. Holdsworth also points to findings in the 2015 BlackRock Investor Pulse Survey. “More than one in five women (21 per cent) admit to being ‘not confident’ about their portfolio, compared with 14 per cent of men, and the primary reason given is that they are uninformed about portfolio construction,” she says. “Advisors have the opportunity to increase female clients’ confidence by educating them and planning for the risks they’ll face while saving and during retirement. A properly assembled product suite can protect against risks such as outliving their money, market volatility, and rising health-care costs.”

Neglecting to plan for the future is risky for women, particularly because of their increasing longevity. Statistics Canada data shows that on average, women live about three years longer than men, she notes.

“Along with increased longevity risk, menopause, bone health, and decline in cognitive ability are also health concerns women face as they age,” she says. “Given the increased risks associated with living longer, women should speak to their advisor about long-term care insurance. It can help address the health, social and personal care needs of individuals who have lost the ability to care for themselves.”

Clients can manage the risk of exhausting assets during their lifetimes with products such as payout annuities, or segregated fund products that provide an income component, adds Ms. Holdsworth. “They can build their own lifetime guaranteed income and have the security their parents may have enjoyed.”

Divorce is another reason for women to proactively plan for retirement. According to Statistics Canada, the number of divorced or separated Canadian women 65 years and older has increased from over 30-thousand in 1971 to over 335-thousand in 2015.

Robyn Thompson, a Toronto-based certified financial planner, points out that a financial planner can help women make informed investment and financial planning decisions, before and after their divorce.

To ensure a retirement plan that lasts, women should “aim for the long haul” and start planning for retirement as early as they can, suggests Ms. Thompson, rather than investing big chunks later in life. A $500 monthly investment could yield $500,000 after 30 years, she says. “With a 30-year window, a vision is created.”

Women also need to keep an eye on taxation, says Ms. Thompson. An advisor can prove invaluable when tax-free savings accounts (TFSAs), registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) come into play.

Though it isn’t gender-specific, the dark cloud of debt can impact investment choices and retirement. According to a study by HomEquity Bank and Equifax Canada, overall debt for those aged 70+ has increased by 12 per cent between 2013 and 2015.

Ms. Holdsworth points out that paying down debt, saving for retirement and converting those retirement assets into income can be a complicated process and an advisor can help women build a plan that will meet their needs and goals.

“Together with their advisor, investors can choose and invest in a professionally managed solution that divides the investment among different asset categories, such as stocks (which are generally riskier but also have greater return potential), bonds (which are generally more conservative and have less return potential) and cash.”

As women take more control over their financial lives – whether they are single or part of a couple – an ongoing relationship with a trusted financial advisor can be a key factor in ensuring a comfortable retirement.

“How financial strategies is constructed, with product and fund selection, depends largely on how many years the client will be investing, their ability to tolerate risk, and their dreams and goals,” says Ms. Holdsworth. “The key is finding the personal sweet spot between risk and reward.”

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