Like many women today, you may find yourself part of the sandwich generation, balancing raising children and caregiving for elderly parents while pursuing a career and other personal commitments. To add to the complexity, you may have to answer questions about your financial future on your own due to divorce or the death of your spouse or partner.
Despite these challenges and added responsibilities, you still have the same considerations that factor into any retirement plan. After growing your wealth to enjoy a particular lifestyle, you want a plan that gives you a sense of control over your money. You want to ensure you can maintain the life you had before retirement and live out your dreams, never having to worry about becoming a burden to your loved ones. One of those goals may be to leave a legacy to your family or a cause you’re passionate about.
While you need to account for these challenges, here are three key steps you can take to help ensure you enjoy retirement on your terms.
Step 1: Define your purpose in retirement
One of the steepest hurdles to retirement is adjusting to your new life. Without your career, you’ll have to find a new purpose and routine to occupy your newfound freedom. So before you retire, it’s important to envision how you want to spend your time so you can ensure your nest egg can support your dreams. For example, do you aspire to see the world, or would you prefer a quiet life close to family? Do you have another passion that you’d like to take up? And what type of legacy would you like to leave?
For many people, retirement is one of the most important transitions. Ahead of this milestone, it’s crucial to take an honest look at your goals and your current financial situation to understand better what you need to do to have the retirement you want.
Step 2: Break it down
Planning for a retirement that spans 30 years or more can seem daunting. Start by looking at a few years at a time—in five-year increments, for example. Your lifestyle is likely to change during retirement, and these shorter-term plans are more likely to stay relevant for the time you need them to. Taking this approach is important as your expenses and needs will change over time. For example, you may be more active in your early retirement, while your later years may bring a greater need for healthcare support.
Knowing when your retirement will likely start, how long it may last, and your lifestyle requirements along the way will also help you assess your preparedness to support your goals based on the sources of retirement income available to you. These income sources may include employer-sponsored pension plans, government benefits, and registered accounts like RRSPs and TFSAs. The level of retirement income you receive can depend on the age at which you retire, the amount you invest, your rate of investment return and other factors—so be sure you understand these parameters ahead of time.
Step 3: Consider health issues
Your health is likely to influence your retirement lifestyle decisions. As you age, sensory and cognitive changes and weakness may be subtle or severe. Falls, cardiovascular disease and difficulty with daily living activities are by no means universal but are common. For example, one in five Canadians lives with arthritis.1 Spending the winter in a warmer climate or moving to a home without stairs could be decisions to make before your health affects your lifestyle.
Because women live longer, they’re more likely to need long-term care. Some two-thirds of Canadian seniors living with dementia are women.2 You may require specialized medical care that can come at an additional cost if your employer doesn’t offer lifelong health insurance, which many employers, particularly in the private sector, no longer do. Out-of-pocket expenses for long-term care services can quickly deplete retirement savings, making it imperative to plan for unforeseen health and care issues.
To live well, plan well
In terms of feeling ready for retirement, only 25% of women believe they’re adequately prepared.3 At the same time, only 22% of women have a formal written financial plan prepared by a professional.4
When life gets busy, finding the time to craft a financial plan can be hard. But a written financial plan is like a roadmap designed to show you how to achieve your goals. Studies show that decision-makers with a comprehensive financial plan have more positive and confident feelings about their financial matters regardless of their income levels.5 It’s never too early to plan for a comfortable retirement, but it can be too late.
Why women should plan differently
- Longevity: Canadian women are living longer, with a life expectancy of 84 years on average versus 81 years for men.6 With more years spent retired, women need to amass a larger retirement nest egg to maintain their lifestyle.
- The gender pay gap: In 2018, women aged 25 to 54 earned on average 13.3% less than their male counterparts.7 Gender inequality in the workplace can be even more pronounced because women are more likely to work in part-time, temporary and lower-wage jobs.
- Caregiving obligations: From looking after young children to caring for elderly parents, women are more likely to have interrupted careers due to family responsibilities. The “motherhood penalty” is estimated to cost women US$16,000 annually in lost wages,8 which can impact their long-term savings and retirement income.
- Being single: A third of women 65 years and over live by themselves.9 Whether single by choice or due to the death of a spouse or partner, living alone during the senior years has implications ranging from reliance on formal care to housing needs and finances. For many women, being single means having sole control and responsibility for their financial future.
Start the conversation today and devise your Total Wealth Plan with Scotia Wealth Management. As part of our integrated planning process, Total Wealth Planning considers a variety of retirement factors. In addition to your personal goals and objectives, some of the factors we look at include lifestyle expenses, income sources, withdrawal rate and sequence, longevity and inflation. We can help you meet your unique needs, create the retirement you want and deserve – and give you valuable peace of mind about this important chapter in your life.
