Experts agree that retirement planning for women is very different than it is for men. There are many reasons for this, including their longer life expectancy, which means they have to live longer on their savings. In addition, it’s often women who take a leave for varying lengths of time to take care of children, which reduces their income and, consequently, their chances of saving enough for their retirement.
Fortunately, more and more professional women manage to prepare for a happy retirement by being disciplined and by following sound advice, even if they have different investment knowledge, concerns and priorities than men. Sometimes, financial planning advice has to be adjusted for women, other times it’s the same for both sexes. Here are some tips to put you on the right path.
- Spend time on your financial plan.
As soon as you start practising your profession, meet with an investment advisor and, together, clearly establish your financial goals and a plan to achieve them. Prepare your budget, which will help you determine your savings capacity. If you are planning to have a child, take into account the decrease in income you will likely incur to fully enjoy the arrival of your baby.
- Contribute early and methodically to your RRSP.
The earlier and more regularly you contribute to your RRSP, the more time your funds will have to grow tax free. Take a disciplined approach by arranging for automatic withdrawals from your bank account, or payroll deductions, if your employer offers this option. If you don’t make the maximum contribution to your RRSP in a given year, for example, the year your first child is born, know that you can carry forward your unused contribution room to future years to take full advantage of the tax benefits of your RRSP.
- Diversify your investments while taking into account your risk tolerance.
Women generally choose less risky investments, which reduces the potential for asset appreciation. If this is your case, it would be advantageous to balance your portfolio by including a percentage of riskier assets, making sure, however, that they don’t keep you from sleeping at night.
- Get information on government plans.
Don’t count on this basic retirement income, however, to maintain the lifestyle you want! For example, the Quebec Pension Plan (QPP) pays a monthly amount of $1,092.50 to those entitled to the maximum at age 65, while the average pension was $480 per month in 2014. As for the Old Age Security (OAS) pension, the maximum monthly amount is $570 in June 2016.
As a professional, you enjoy a good quality of life, and you should be able to maintain it when you stop practising. To learn more about how to prepare for a retirement that meets your expectations, contact your Professionals’ Financial Advisor.