Women and retirement planning

Because you keep telling me you want to do it but aren't sure where to start.

Welcome to The Budgette where we talk about solo finances. We’re still on our retirement kick because it’s tax season. This week’s issue of The Budgette looks at women and retirement.

(7-minute read)

Am I the person who will talk about money at a party? Yup. Photo by Elevate on Unsplash

I had the opportunity to speak with investment advisor Ilana Schonwetter, who has several designations including personal financial planner, certified professional consultant on aging, chartered investment manager, and she has a certificate in advanced investment advice.

I had a great time talking to Ilana about where women were with their retirement planning.

Renée:

Let's start with a general question. How prepared are Canadian women for retirement?

Ilana:

For the most part, I would say not very prepared. There is a large gap between where women need to be and where they currently are. One of the biggest issues is a lack of knowledge and education. Many women are afraid to ask questions and seek out information about finance and retirement planning, which can prevent them from making informed decisions.

It's a little bit intimidating coming in, asking for more clarity and asking to focus a little bit more on the education side, which will allow them to make good decisions rather than being told what to do. 

I believe that it's important to encourage girls and young women to learn about finance, investment, and goal-setting from a young age.

Renée:

You mentioned that women can feel intimidated when it comes to finance. Is this due to a lack of financial education or is it because of the financial industry which has a history of ignoring women?

Ilana:

I believe it's a combination of both. We don’t teach basic investment concepts or financial habits in school. And I'm going to say that today in the financial services industry it's a more level playing field where there is a good variety and good choices around working with a male or a female advisor. I remember the first firm that I worked at in the 90s. There were 120 investment advisors and I think there were five women.

 Renée:

You mentioned that you've seen women approach retirement planning too late. How late is too late?

Ilana:

It's never too late to start planning for retirement, but the later you start, the harder it can be to achieve your goals.

Women tend to take on a lot in their lives, whether they're single or if they have a family. Most women are juggling work, parents and family.

In many cases, while they are focusing on these other things in their life, they put themselves in second place, and by the time they've taken care of all of these other aspects in their life then they concentrate on themselves.

That could be in their late 40s or early 50s. which unfortunately means that they have to do so much more to get the same outcome than if they started in their 20s or 30s.

Renée:

What should women be taking into consideration when planning for retirement?

Ilana:

Women should start by establishing a financial plan that takes into account their current net worth, retirement income needs, and retirement age goals. If there is a gap between their current situation and their retirement goals, they may need to consider downsizing their home, working longer, or adjusting their lifestyle to save more.

Having a financial plan can help women make informed decisions and find ways to address any gaps they may have.

Renée:

I have to ask the obvious question. Can people afford to retire these days?

Ilana:

Within my practice, I work with a lot of high-net-worth individuals, so it's usually not an issue for them. But from what I've seen with colleagues at other firms, many Canadians are having to push retirement out a few years and delay their CPP and OAS payments to generate a reasonable income stream to survive on, especially if they live in Vancouver or the Greater Toronto Area. The cost of living, housing, and services are so high there that it's becoming a challenge.

We've also had some challenges with retirement planning in general. Many people planned for a retirement period of 15 years from 65 to 80, but with longer lifespans, we now need to plan for a retirement lasting into our 90s. Additionally, the low-interest rate environment of the past decade has impacted returns negatively for many investors.

So longevity has been a little bit of a headwind for many people as far as financing a longer retirement than they may have thought they would have been planning many years ago.

That's why having a financial plan in place and monitoring and adjusting it annually is crucial for a successful retirement. It's like having a GPS in your car - if there's an accident ahead or the road has been torn up, you need to figure out a way to navigate around it and find solutions to bridge any gaps.

Renée:

With longevity in mind, how are people defining retirement these days? 

Ilana:

Today, retirement is a transition, it's not a finished line. So very few people are saying ‘I'm just gonna quit and I'm just gonna play golf.’

What I'm seeing is people would like to have a sense of purpose and a sense of accomplishment. So many of us are defined by what we do that many of my clients are not willing to completely give up who they are based on their careers. So, a transition into part-time is something that I'm seeing more and more frequently.

I’m also seeing a change of career to pursue a passion or volunteer work with something near and dear to your heart two days a week or three days a week.

I think that the ultimate goal of a successful retirement is having enough of an income pool to generate your desired income stream on an annual basis, and still choosing to contribute in whatever capacity makes you feel good.

Renée:

For women saving for retirement, is it a case of they have to start earlier than men?

Ilana:

The sooner you start, the more probability you have of success. If you look at the simple rule of 72, it tells you how often your money will compound.

If you could have an extra four or five years on the tail end of your investment cycle, it could mean, depending on how much you've saved, it could be tens of thousands of dollars of additional savings or hundreds of hundreds of thousands of dollars in additional savings.

I think for women because we still earn less today, unfortunately, because we sometimes leave and return to the workforce for whatever family reasons may occur. We do have fewer resources available to us with which to save.

So we must start sooner, and in some cases perhaps don't look at that 10%, look at 15% or even 20% of your saved of your income as far as savings to help accomplish a well-funded, comfortable retirement. 

Renée:

Is there anything that I have not asked you that you think is extremely relevant for the audience?

Ilana:

I think just awareness and being curious, confident and asking questions. Educate yourself. You know, it's really funny. I cannot tell you how often I will be at a cocktail party or a social get-together. And I will hear men standing around speaking about investments, portfolios, and financial outcomes. I don't think I have ever heard a group of women standing around having that conversation. 

So I think we need to be a little bit more proactive around having conversations with each other, and with professionals who can help give us the knowledge to make good decisions moving forward.

You can read more of our conversation about housing, wealth-building, and net worth, listen to the entire audio interview, and read the ChatGPT iteration of this interview (it’s hilarious) if you become a paid subscriber.

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This week’s readings:

I wrote a couple of articles last week.

What Are The Changes In Canada For Tax Season 2023? (Forbes Advisor)

First Home Savings Account (FHSA) Guide for Canadians 2023 (Wealth Rocket)

I also appeared on The Cost of Living podcast where I talked about saving money buying in bulk when you’re single. Also, no one lives the Sex and the City lifestyle when you live alone. I am writing this in old, well-worn wool pants (they have an elastic waist). So far, I have cleaned the toilet and now I have to do laundry. Glamorous. The segment is here and I come in at around 5:50. (CBC Radio)

What we can expect to see in today’s budget. (CBC)

How the Ultra-Rich Avoid Paying Taxes (Onpoint)

Kevin Carmichael: 3 things Bank of Canada subtly told us about interest rates in March minutes (The Financial Post)

I’d add political action as well. Live your best (and cheapest) life: 11 top tips from money-saving influencers (The Guardian)