Why women are more likely to be unprepared for retirement — and what you can do about it
You’ve been to free retirement workshops.
Your mom gave you a copy of "Die with Zero" to read on your "overpriced" vacation.
A financial adviser at the bank tried to help you by selling you mutual funds, a credit card, line of credit and life insurance all in one 30 minute sit down.
The TikTok fin-fluencers have their hot lists of ETFs you need to buy, and preferred platform (with affiliate links), and this all seems smart, but is taking financial advice on social media a solid strategy?
An ex mentioned how expensive financial planning is, so you never bothered investigating this option, but later found out your old flame actually uses a planner on the regular.
This business about persistent pay inequity pisses you off, especially when costs are high and you’re supposed to be saving for retirement, but can’t seem to scrape together even 5 per cent of your income for this goal. Like it’s 2024. What is going on?
If you’re a woman investor and feeling annoyed, good. You’ll need to harness this tension, and redirect it towards concrete steps to better your financial future.
The undeniable fact about women and money is that women need to save more money for retirement than men.
Because women live longer than men and sadly still earn less than men for performing the same jobs, women are statistically more likely to be underprepared for retirement. It’s also important to note that the pay gap worsens significantly for women of colour and mothers.
Don’t fall off your chair when you read this, but the required savings pace for women to ensure they are prepared for their golden years is now between 10 and 20 per cent of gross income, socked away in quality investments that are geared towards an age-appropriate risk level. Here are my best tips to get saving a lot more.
Get to know what you should be paid, and use this data in salary negotiations
Being paid properly means earning at or above the market rate. Some of my favourite places to look for comparable salary data are:
-Job postings on sites like LinkedIn, Monster and Indeed (many employers are starting to post the pay bands right alongside the job description)
-Glassdoor
-Many well known consulting firms publish salary guides and calculators like Hays and Morgan McKinley, for example
-Professional Associations also publish salary data for their members
Using this data, begin salary negotiations with your current employer (and if interviewing, when negotiating offers). If the competitive market data isn’t compelling enough for your current employer to correct your pay, and you’re underpaid by more than 15 per cent, you probably need to change companies.
Get a financial plan
Women (and men) who have written financial plans are more likely to achieve their retirement goals. The best plans are guided by financial professionals that understand investments, taxes, your costs and goals. Consider working with a financial planner who is a woman.
The financial planning process begins by identifying personal, financial and professional goals for the next five years plus it puts a value on each of these goals. Then you and your adviser can build retirement savings strategies (usually a combination of RRSPs, work pensions and TFSAs) to support these goals. A great plan, and adviser, will outline exactly what needs to be done to get you ready for retirement, and that could include advice to trim spending, save more, invest in a certain way and so on.
A custom plan is precise for your situation, and it costs money to get one built. Shop around for financial planners and money coaches who have been recommended to you. You may have work benefits for this, by the way. If you simply can’t afford to pay for advice yet, investigate free alternatives with your financial institution.
Grow your retirement savings over time
There’s a strong chance your planner is going to suggest you need to save more. Try automating regular contributions to your retirement savings plans (RRSP, work pension and TFSA) on payday, and then increase these amounts, even by a small percentage, every three to six months (the approximate length of time it takes to form better budgeting habits). As you trim up your spending, saving more gets much easier.
Spend your hard-earned money with purpose
Financially secure women pay themselves first, then they pay everything and everyone else.
They plan their spending with the money that is left over after saving for retirement. In other words, they live off of between 80 to 90 per cent of their gross earnings.
With what’s left, it gets allocated mindfully towards bills, upcoming goals like travel and fun purchases.
Using whatever tools and templates make you happy, check on your spending at least once per week and course correct if you’re spending too much, which means trimming back.
Deal with overspending fast. Cut out all unnecessary spending, especially on things that don’t bring you joy, and renegotiate all your fixed and variable costs to ensure you're getting the best value for your money. If your spending habits or debt levels are a source of anxiety and depression, seek support from a therapist or money coach that has a background in money psychology.
You can decide today to become a financially savvy woman. And going forward, you can choose to make the best decisions possible for your money everyday. That’s actually what a wealth mindset is all about. You won’t do everything right all the time, but with your consistent efforts, good guidance and a willingness to learn, progress on your money will be fast to follow.
This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.
