By Michael Kane
Vancouver Sun
Smart Money
Monday, February 25, 2002
Rosetta Petra is the money manager of her Surrey family of four.
At 31, she makes sure funds are set aside for retirement.
"I worry about it, I stress about it," she says. "My
husband says we're young, we've got plenty of time."
As the midnight Friday deadline approaches for a 2001 RRSP deduction,
financial planners say women like Petra are right to consider their
long-term future.
First, women generally have lower incomes, shorter working careers
and longer lifespans than men. That means they need a bigger nest-egg
to supplement lower private and government pensions for a longer
period.
Second, women tend to be conservative investors, taking less risk
and accepting lower returns than men. That means they need to save
a greater percentage of their income.
A third reason is "bag lady syndrome." Some women dread
poverty in old age, picturing themselves wheeling all their worldly
belongings in a battered shopping cart, while some men just hide
their heads in a bag and assume everything will turn out fine.
Adrian Mastracci, president of
KCM Wealth Management says, “Women tend to tinker less with
their investment portfolios than men.”
Recent polling by RBC Financial shows that women are more likely
than men to feel concerned about their plans for retirement and
economic uncertainty.
"A strong gender difference may exist when it comes to the
way women and men define retirement goals or financial security,"
says personal finance author Joanne Thomas-Yaccato.
"Men may simply feel more financially secure than women, regardless
of the state of their finances."
Although they are planning to buy a bigger home within the next
six months, Petra and her husband, Gianpiero, are socking away $5,000
in a spousal RRSP this year. He will claim the tax deduction as
the family's higher income earner, but the money will be taxed as
income in her hands when she retires, reducing the family's over-all
tax bill.
They are also opening a registered education savings plan to take
advantage of the Canada Education Savings Grant -- Ottawa's 20-per-cent
top-up worth up to $400 a year per child. This year they will put
away $1,000 each for their children, Alexander, 6, and Julia, 2,
to generate a total grant of $400.
Although it will be 12 to 16 years before the children will need
the money for post-secondary education, the Petras are taking the
same moderate approach to their RESP as they do for their RRSP which
is invested in a balanced-growth mutual fund portfolio -- 10 per
cent money market funds, 20 per cent Canadian equity, five per cent
international equity, and 65 per cent in a balanced growth fund
which includes a fixed-income component.
"Their aim is to average eight per cent a year," says
their investment adviser.
"It is a very moderate and achievable approach for a couple
with a limited tolerance for risk.
"While risk-taking investors are currently licking their wounds,
they can sleep at night knowing they have not had a negative return."
Rosetta has a pension plan with her customer service job at North
Vancouver's Navigata Communications, a telcom services provider,
but Gianpiero, a sales manager with Olafsons foods, does not.
With their eyes on retirement at 55, Rosetta says they view their
RRSP as "a big savings account that we can't touch."
The Royal's latest RRSP survey, conducted by Ipsos-Reid, found:
- 34 per cent of women are concerned they haven't done enough
to save for retirement compared to 28 per cent of men.
- Six in 10 women have not yet determined the amount of money
they'll need to have a comfortable retirement.
- 47 per cent of women feel they need to make a more determined
effort to live within a budget compared to 37 per cent of men.
- 50 per cent of women worry about economic uncertainty compared
to 35 per cent of men.
Thomas-Yaccato says women are more likely to be aware how quickly
the economy can sour.
"Women have a long history of being the family CFO,"
she says. "
This includes not only managing the household finances, but also
controlling 85 per cent of the consumer dollar spent by families
in North America.
"When the economy turns bad, women often feel it first in
the most personal and profound economic sense - the home front."
Polling by TD Financial suggests that women consider themselves
financially successful and want to manage their own investments,
but they are limited by a lack of confidence in their investment
abilities.
Fewer than half of 900 women surveyed late last year by Environics
contribute to an RRSP and just half say they have formalized their
goals with a financial plan.
Marital status and age are also factors in financial awareness
and preparedness.
Single, separated, divorced or widowed women are less likely to
have a financial plan or own an RRSP, and are less likely to make
use of technology to access financial information.
"What concerns me is that women live on average six to seven
years longer than men," says Patricia Lovett-Reid.
"They're also most likely to care for children or aging parents,
losing an average of 11 years from the workforce."
While 87 per cent of women surveyed are interested in playing a
role in their household's financial or investment decisions, almost
40 per cent say they lack confidence in their ability to manage
their investments.
As a result, they tend to choose low-risk investments like guaranteed
investment certificates and Canada Savings, rather than equities
which fluctuate in value but historically have provided higher returns
over time.
"On the positive side, women tend to tinker less with their
investment portfolios than men," says fee-only financial planner
Adrian Mastracci of Vancouver's KCM Wealth Management.
"This allows them to stay with their chosen course for a longer
time."
The non-profit Investor Learning Centre of Canada says women may
not make different investment choices than men but they tend to
ask more questions and research more before making investment decisions.
More women than men attend the ILC's classes and seminars.
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