Women in retirement

Here are some sobering statistics about women and why they need to start saving for their own retirement so starts the article by a writer for Liberty Financial Services. Yes, the stats quoted are scary, as is the rest of the article.

· Two of every five marriages end in divorce before the 10th anniversary;

· The mean age of a divorced woman is 44;

· Women outlive men by 4.4 years;

· Women earn 27% less than men as a result of the gender pay gap; at more senior levels, women earn 39% less;

· One in every two families is headed by a single mother, and only 16% receive financial support from the father;

· Working women are more likely to be caught in the sandwich generation – looking after their children as well as their parents.

The writer goes on to say that women are living longer than men, earning less, spending more on care both for children and parents. This means that women are poorly prepared for the retirement years.  When women are ready for retirement, the lack of savings puts women into the situation where they have to work past retirement age.

So more women today are getting divorced and may have access to their ex-husband's pension when they are ready to retire. This is what happened to my brother-in-law and his ex-wife. She had never worked and did not have any savings, so when they divorced, she opted to collect her share of his pension. My brother-in-law actually worked past retirement to make sure she could not collect on his pension early. In the end, it has worked out for both of them. She started a career but will have to work until she is 65 and he retired and is able to live off his portion of his pension.

Women need to look at any pension funds or plans their husband is contributing to or has as an asset if they are getting a divorce. The reality is that they may have access to a portion of their ex-husband’s retirement fund when they divorce. If so, invest the funds in their own retirement or opt to be paid a portion of the pension when retired. Either way, make sure your lawyer ensures this is part of your settlement.

From a legal point of view, the most common type of marriage contracts is the in or out of community of property with accrual, meaning the wealth accrued from the date of marriage is shared equally on divorce. This allows the divorced woman to share equally in the wealth accrued during the marriage.

Another piece of advice offered in the article is to save 15% of your net salary, starting with your very first pay cheque, to maintain this at 15% as your salary increases. If you are working and making a good wage, the advice of saving 15% of your net salary (after taxes and other deductions) makes sense. However, many women are not making a good salary, they are making minimum wage or just beyond and they are struggling to pay rent, feed their families and survive, with no help from their ex-husbands. So, if you have no savings at all and nothing left at the end of the month to save what should you do?

The advice in the article is to stop living beyond your means and take on more work, which is not helpful. For many of us, the idea of saving for retirement in our 30’s 40’s and early 50’s is a dream. Life is expensive if you are making the average wage or below the average wage. The author goes on to say that the idea of ‘retirement savings’ is often looked upon with dread by women since it conjures images of old age and decrepitude.

Thinking about saving for retirement may be a dream, but it is never too late to build in a saving plane. Remember that in Canada and in the USA, there is government help when you turn 65. In Canada everyone at the age of 65 can claim the Old Age Security and if needed the Guaranteed Income Supplement, which works out to be about $ 20,000. In the USA there is the Social Security benefit which is dependent on your age, but the maximum amount if you retire at age 65 is currently $31,068 a year. 

Not everyone is entitled or will collect the maximum in either country. So as women start to think about retirement, they need to know that there is some government assistance. This does not mean they should not save, but they could set a savings goal that is more realistic than 15% of net salary. Perhaps start by savings between 2 and 5% of gross income. Once the saving habit is established, then moving toward a higher goal and living with a culture of savings becomes easier. There are lots of products available to assist in developing the culture of investing in yourself.