By Elizabeth Naumovski

Women continue to retire in poverty because we live longer than men, we have less money to retire with because we earn less, and we have disrupted work lives as we stay at home to take care of children & elders as primary care givers. Has anything changed?

Before COVID, women were already behind financially. COVID only made it worse. The only way the pandemic helped was to put a spot light on how women are needed for the economic recovery.

According to the October 2019 Statistics Canada (“StatsCan”) Gender Wage Gap report ¹,on average, Canadian women earn only $.87 for every $1 a man makes. To keep the numbers simple, if we assume that men make on average $100,000 per year, then according to the StasCan report, women make only $87,000 per year, or $13,000 less per year. Over 10 years, we will earn $130,000 less than men and over 20 years we are making $260,000 less. Over a woman’s work life, this gap deprives her of the power of compounding in her RRSP and the gap widens. Therefore, women retire on less.

And we live longer than men.

A Financial Post article by Tracey Lemay dated Dec 16, 2000 says: “Sisters, you’d better start saving for yourselves”. In the article is says “women need an extra $200,000 before they can retire” and that was 21 years ago!

Nothing has changed.

Let’s look at the math & facts to make this point.

1) Women make less than men ². “In 2019, female employees aged 25 to 54 earned $4.13 (or 13.3%) less per hour, on average, than their male counterparts. In other words, these women earned $0.87 for every dollar earned by men.”

2) Women live longer than men. ³ In 2020, average life expectancy for Canadian women is 84 years while Canadian men are expected to live 80 years.

3) The only difference between the man and the woman’s financial expectations are the difference in salary and the difference in life expectancy.

Let’s assume that there are two people, the average man and the average woman.

They each enter the workforce at age 25 and retire at age 65, so they work for 40 years. During that time, they earn $100,000 and $87,000 each year respectively. They each contribute 10% of their after tax income to their RRSP, which compounds tax free.

When they retire, they withdraw a portion of their portfolio such that they have nothing left at their expected life expectancy of 80 and 84 years. This works out to $2,935 and $4,116 per month respectively.

Note that in terms of income, the man earns 15% more than the woman. However, upon retirement the man retires on 40% higher retirement income. (This is the magic of compound interest at work!)

Now let’s say that the woman wishes to retire with the same nest egg as the man; she will have to work almost three more years that the man, i.e. she will retire at 68 - and still retire on a lower income because she lives longer.

Let’s say that she increases her contributions with the gaol of retiring with the same nest egg at the same time: She would have to contribute 11.5% of her income (not 10%) and live on 17% less after tax after contribution income.

Ladies, it’s time to be proactive about you and your money.

Make a financial plan!

Start Early!

Live a frugal and disciplined life!