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By: Tracy LeMay
Money
Financial Post
December 16, 2000
Women would have a better chance at a comfortable
retirement if they took greater notice of one
the basic differences between the sexes.
It's got nothing to do with who likes shopping
best, or who really knows how to wield a TV remote.
Rather, it's the mundane fact that on average,
women outlive men.
The implications of that simple reality for retirement
planning aren't fully appreciated, says Adrian
Mastracci, a Vancouver-based investment counsellor
and financial planner.
The longer lifespan has an impact on the size
of the nest egg women have to build to generate
the same retirement income as men. Also, women
are often thrust into the role of money manager
after their spouse or companion dies, a job that
they may not be prepared to handle.
Women who retire at 60 will have, on average,
as much as 30 years of retired life, suggests
Mr. Mastracci, of KCM Wealth Management Inc.
Men, on the other hand, will average only 25.
The five extra retirement years have to be funded,
he points out, and that can be expensive.
Mr. Mastracci offers the example of a 47-year-old
women who wants to retire at age 60 with $75,000
in income (in today's dollars, before taxes).
She needs to generate more than $2.2-million when
she retires to provide that level of income through
retirement. A man, meanwhile, needs to stockpile
about $2-million.
"I get a lot of gasps from [women] when I come
up with the idea that most of them probably need
about 10% more on average. It's a substantial
difference from men just to keep up the same level
of income," Mr. Mastracci says. "You just have
to have more in the kitty -- it's just as simple
as that."
Women, in general, will have to save more, "or
they're going to have to try to make their money
[earn] more," says Sandra Foster, a Toronto-based
planner and author of several money management
books.
But there are complications in the way of building
that bigger investment kitty.
Mr. Mastracci points out that women generally
have shorter working careers than men -- although
that is probably changing -- and are more likely
than men to be taking care of children and elderly
parents or other relatives.
"This increases the challenge of accumulating
sufficient capital for their retirement needs,"
he says.
And many women of retirement age today earned
less than men, says Cheryl Bauer Hyde, a financial
planner with Oehler & Associates Financial Management
Ltd. in Regina. "They haven't accumulated the
resources" to fund retirement properly.
Another problem is that women are more likely
to suffer disabilities then men, Ms. Foster says.
That can have an impact on their ability to earn
income and save for retirement, she says.
And when it comes to making their savings perform,
many women tend to be conservative investors,
Mr. Mastracci suggests, who favour fixed-income
investments over more risky, but more rewarding,
equities.
Also, for married women, or women in different
relationships, the death of a spouse or companion
means they will have to begin managing their finances.
In many instances, women have not had an opportunity
to gain the expertise needed to handle these issues,
planners say.
While the difference in life expectancy means
women have to create more wealth to retire as
comfortably as men, there are signs of improvement.
A recent Statistics Canada study shows that the
gap in earnings between men and women at retirement
has narrowed substantially in the past two decades.
The after-tax income of women in 1997 between
the ages to 65 and 69 shows that women in retirement
earned 61% of the income of men the same age.
That's a big jump from 41% in 1971.
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