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| Adrian Mastracci, president of KCM Wealth Management, says “A longer life is only one reason why it is critical that women develop an investment plan consistent with their unique requirements. For women, the marathon of money management is longer than the men's." |
For Immediate Release
Vancouver, BC (April 25, 2005): It’s no secret that women live longer than men. Sometimes much longer.
In a speech back in 1868, Mark Twain said, “What, sir, would the people of the earth be without woman? They would be scarce, sir, almighty scarce.”
Adrian Mastracci, “fee-only” investment counsel at Vancouver based KCM Wealth Management comments, “In fact, in the US and Canada, women who retire at age 60 can often enjoy in the vicinity of 25 to 30 years of retirement life. That is generally five years more than most men.”
“This is just the first important reason why women need to plan early and wisely,” adds Mastracci, “The goal is to ensure ample income to comfortably see them through their retirement years.”
“My example in Table 1 shows that bigger retirement nesteggs are required for women as compared to men,” remarks Mastracci.
Mastracci says there are five other significant reasons for women to plan early:
- Women, more than men, are affected financially by life events such as marriage, children, workplace earnings and divorce.
- Women generally have shorter working careers, but longer life spans, than men do.
- Women are more likely than men to be taking care of children and aging parents.
- Women tend to outlive men; therefore, at some point widowhood will force them to become totally responsible for their financial well being.
- Women tend to be somewhat more conservative investors, allocating less to growth equities than men.
“All of these reasons contribute to women having a bigger challenge in accumulating their appropriate retirement nesteggs,” notes Mastracci, "On the other hand, women tend to tinker less with their portfolios and are more likely to seek an advisor, as compared to men.”
Sizing up financial freedom for women
As an example, let’s estimate the size of retirement nestegg for a woman age 45 that wants to retire at age 60. One where the desired retirement income is in today’s dollars, for lifetime.
Assume that inflation is 3% per year and investment returns are 6% per year from now on. Full CPP and OAS entitlements are received.
Five years are arbitrarily added to normal life expectancy. Inheritances are not considered and no legacy is left.
Of course, the values of assets owned are deducted from the estimated portfolio to arrive at the net amount required. Assets may include employer pensions, RRSPs, personal portfolios, income producing real estate, family trusts and businesses.
Table 1. Women’s Financial Freedom
| Desired Retirement Income/Year |
Estimated Size of Portfolio |
Difference |
| For Men |
For Women |
| $40,000 |
$840,000 |
$910,000 |
$70,000 |
| $50,000 |
$1,130,000 |
$1,230,000 |
$100,000 |
| $60,000 |
$1,420,000 |
$1,550,000 |
$130,000 |
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What women can do
Size aside, the estimates are meant to stir thought and discussion. Direct your emphasis on what is important to you about retirement. That exercise leads to defining your specific needs and criteria.
Retirement can bring about a variety of unknowns. Most relevant are rising inflation, the cost of personal health care issues and the investment returns actually experienced.
The size of the indicated portfolios means that women have to invest diligently for longer periods of time. Adopting these principles will assist the journey:
- Time is your biggest ally, so start investing early.
- Discipline yourself to a savings program you can stay with.
- Repay debt, especially consumer debt, even if the interest is deductible.
- Diversify and periodically tweak the portfolio as required.
- Tally all investment costs, such as the invoiced ones, fund MERs and deferred sales charges.
Implications of financial freedom
Aspirations of financial freedom have significant portfolio implications for women. The answers provide essential input into the strategy and structure of the investment plan.
The important variable your portfolio ought to focus on is the investment rate of return required to achieve the financial freedom you’ve chosen. Accordingly, your asset mix decisions become essential in the quest for retirement.
Once you know your personal rate of return, you can determine the amount of risk appropriate for you. This is especially important to women who have reached their financial freedom goal.
“Priorities often change through the stages in life,” points out Mastracci, “Women first starting out may be more aggressive investors, while those approaching, or in retirement, are more likely to concentrate on preserving the nestegg.”
“A longer life is only one reason why it is critical that women develop an investment plan consistent with their unique requirements,” concludes Mastracci, “For women, the marathon of money management is longer than the men's.”
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