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By Adrian Mastracci
North Shore News
Business Section, "Loose Change"
Sunday, October 7, 2001
It is no secret that women live longer than men. Sometimes much
longer.
In fact, in Canada and the USA, women who retire at 60 can often
look forward to enjoying in the vicinity of 25 to 30 years of retirement
life On average, that is almost five years more than most men.
This is just one important reason women need to plan early, and
wisely, to ensure they will have enough income to comfortably see
them through their retirement years. As I will show below, a $150,000
bigger nestegg is required for retirement in one example alone.
I believe 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 the ones taking care of
children and aging parents.
- Women tend to outlive men; therefore, widowhood will at some
point force them to become totally responsible for their financial
well being.
- Women tend to be somewhat more conservative investors, investing
less in growth equities than men do.
All of these reasons contribute to women having a bigger challenge
in accumulating a sufficiently large nest egg to take care of their
goals and aspirations.
On the positive side, women tend to tinker less with their portfolios
as compared to men. This allows them to stay with their chosen course
for a longer time horizon.
Let's illustrate the implications of one retirement example. A
50 year old woman wanting to retire at age 60 with an annual income
of $60,000, in today's dollars, needs to accumulate a significantly
larger investment portfolio than a man of the same age.
The man needs approximately $1,450,000 by age 60, whereas the woman
needs to accumulate over $150,000 more to provide the same income
throughout her expected lifetime.
The size of these numbers often begs the question "What do
I have to sacrifice to achieve such a portfolio?" It may surprise
you that the answer from my clients is "very little, if anything".
Adopting these principles, however, will assist your journey. Time
is your biggest ally so start as soon as you can and begin a savings
program you are comfortable with.
Priorities often change through our stages in life. Women first
starting out may be more aggressive investors, while those approaching,
or in retirement, are more likely to concentrate on preservation
of the portfolio.
Because women live longer, and often have more financial obligations,
it is critical that they develop a life-long investment plan consistent
with their unique requirements.
For women, the marathon of money management is longer than the
men's.
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