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Ninety per cent of women will end up managing their own finances at some point
When I write about financial independence or “Findependence” the perspective tends to be through the lens of married or common-law couples. But not everyone is part of a couple, and the quest for Findependence can be much tougher if you’re a single person of either sex.
Even if you are part of a couple, there are no guarantees that will continue indefinitely. Divorce, even “grey divorce,” is not uncommon; and the part of the marital vow that reads “’til death do us part” is a reminder that even the happiest of couples are eventually parted.
Still, for as long as it lasts, financially coupledom is easier than being single. At retirement, couples benefit from two sets of CPP and OAS payments, two RRSPs or RRIFs, and two sets of TFSAs. Plus, if one member belonged to a defined benefit pension, pension income splitting confers a tax advantage on senior couples that singles do not enjoy. The same goes for spousal RRSPs.
All of which makes the upcoming publication of the book "Bank on Yourself" (Milner & Associates, 2019) by Ardelle Harrison and Leslie McCormick, particularly timely.
Harrison is a lifelong single woman while McCormick is a senior wealth advisor with Scotia Wealth Management, and the subtitle makes their particular emphasis clear: “Why every woman should plan financially to be single. Even if she’s not.”
Certainly, the numbers are grim. The authors note that 90 per cent of women will end up managing their own finances at some point, whether because of divorce, widowhood or because they never married in the first place. And because women tend to live longer, you can expect five female centenarians for every male who reaches 100 years (according to the 2016 Canadian census).
The authors also note that 28.3 per cent of unattached women live in poverty and single older women are 13 times more likely to be poor than seniors living in families.
General financial planning principles apply across genders, [McCormick says], but women have longer life expectancies, so when you add the gender wage cap, it’s harder for women to build wealth.
They cite Pew Research’s eye-opening finding that when today’s young adults reach their mid 40s and mid 50s, 25 per cent of them are likely to never have been married, and that by then “the chances of marrying for the first time after that age are very small.” (Whether by choice or circumstance.)
But even those who do “couple” earlier in life may not always remain in that state. A 2013 Vanier Institute of the Family report says 41 per cent of Canadian marriages end before their 30th wedding anniversary. Sixty-eight per cent of divorced couples cited fighting over money as the top reason for the split. 2011 Canadian census data shows the average age at which women are widowed is 56.
Another issue is the prevalence of “grey labour”: those who have earned low incomes in marginal jobs throughout their working lives tend to be doomed to having to keep working in such jobs even into their 70s. Another recently published book in the United States — Downhill from Here by Katherine Newman — focuses on the retirement hardship of both sexes in light of broken corporate promises about defined benefit pensions. Especially vulnerable are low-wage workers who can’t rely on the support of a spouse: “This is often the lot of women who have spent much of their lives at home or in minimum wage jobs and now find themselves divorced or widowed, single and in financial distress.” The book’s subtitle is “Retirement Insecurity in the Age of Inequality.”
There’s no magic bullet to prevent this, Harrison and McCormick explain. “Achieving financial independence is hard work,” they write. They found many single women procrastinate in their financial planning because “they thought they might get married one day.” It was only when they realized that may never happen that they got serious about taking personal responsibility for their future financial independence.
Leslie describes herself as a wife and mother of two daughters. Ardelle, on the other hand, is a retired woman who has been single her whole life but still “managed to reach all her financial goals by herself.” While she “never really planned on being single all her life … she was prepared to be.” At one point, Ardelle worked four part-time jobs on top of a full-time job. Even so, she retired early with four major income streams: teacher’s pension, a healthy investment portfolio and rental income from two investment properties (at one point three), a journey that began with an early paid-for condo. But that’s because she realized early on that “this really is all on me.” Ardelle also runs a part-time health and fitness business.
To achieve financial success, it’s no surprise that the authors are big on the value of making a plan. Their ‘7 steps to success’ are to make a financial inventory of income and expenses, identify one’s vision for the future and plan to make it a reality through budgeting and monitoring progress, then reviewing and repeating as needed.
A key concept is having multiple streams of income, at least three in retirement.
Employment income is the springboard to other income streams, including employer pensions. A second is government benefits unlike CPP and OAS. Other streams are business, investment and real estate income and annuities. Home owners have a potential backup in their home equity, although the authors rightly say, “Debt is not something you want in retirement.”
I asked McCormick if these principles apply equally to single men. General financial planning principles apply across genders, she replied, but women have longer life expectancies, so when you add the gender wage cap, it’s harder for women to build wealth. Female baby boomers can expect to outlive their spouses by 10 to 15 years, “yet so few women plan for it.” While 31 per cent of women view themselves as being financially knowledgeable, 80 per cent of men do. Her hope is the book will help bridge that gap.
Jonathan Chevreau is founder of the Financial Independence Hub, author of Findependence Day and co-author of Victory Lap Retirement. He can be reached at email@example.com
Copyright Postmedia Network Inc., 2019