“If I’d known I was going to live this long, I would have taken better care of myself.” Eubie Blake, Composer
If only we knew how long we would live. How long we live is one of the critical pieces of information for retirement planning. The longer we live, the more years we need to financially plan for and the more money we need to have saved. Fortunately, or unfortunately depending on your perspective, it simply is a question we don’t know the answer to. What we do know though, is that women are living longer than men and living longer has tremendous implications for wealth and well-being. Since women are living longer, it is essential we be prepared financially for that added longevity.
For some women, there will be a significant source of help. Given the aging Canadian population and women outliving their male counterparts, Investor Economics and TD Bank’s report “Time Treasure, Talent: Canadian Women and Philanthropy” found that “by the end of 2024, it is estimated that women in Canada will control approximately $3 trillion in personal wealth”. In fact, other research has found that 70% of inheritances in the great wealth transfer will go to women as they are expected to inherit from both their parents, and for those who are married, their husbands. And for many women, it is the inheritances they receive that will make all the difference and allow them to retire comfortably and remain that way.
But counting on an inheritance to see you through is risky business. If you are counting on mom and dad to leave their money to you, you may be in for a surprise. Costs of health care and long-term care can quickly eat up assets resulting in a much lower than expected inheritance. Wills can be changed. It is no longer uncommon for people to now leave their wealth to their grandchildren rather than their children. Without proper planning, blended family situations can result in all assets going to one person’s children with nothing (or limited) amounts going to the other’s children. Even in a spousal situation where you are a part of a blended family, will everything come to you should your spouse die before you do? Or will part need to be paid out to their children from a previous relationship? Will what’s left be enough for you? On average a widow’s income drops by 40% when husband passes away. An inheritance can be a gift that helps you move from comfortable to more comfortable, but relying on one to get you from just maybe getting by to solving all your money problems is not the answer because it simply might not happen.
Achieving a lifetime of financial independence takes independence, not reliance. And for women, the stakes are especially high. We live longer. That means we need to retire with more than our male counterparts. And yet, we typically earn less during our working years, take time out of the workforce, and our lives cost more. But if counting on an inheritance isn’t the answer, how then do you achieve a lifetime of financial independence?
- Proper Planning – That reflects your values, is focused on outcomes and isn’t solely focused on investment performance. And importantly, is geared towards you being able to generate a reliable income for your lifetime. A proper plan is your road map for how you, in your personal circumstances, can achieve your goals, including a comfortable retirement for your lifetime, whatever comfortable means to you.
- Invest – Save regularly, and invest your savings. While it is true, the earlier you start the better, it is never too late to start either. The more you save and invest, the less you have to work for your savings as your savings start to work for you. The growth of your savings is especially important as women prepare to live a long time. Don’t be scared to invest. Women make great investors. In fact, research has found that women outperform men when it comes to portfolio performance.
- Don’t abdicate financial responsibility – this is the number one piece of advice that divorced and widowed women will tell you. For those who are married, make sure you are a part of the financial conversations. Know what and where your household assets (what your own) and liabilities (what your owe) are. 90% of us will be solely responsible for our household finances later on in life – you don’t want negative surprises.
- Be Prepared to Sacrifice – The road to a lifetime of financial independence doesn’t usually come easy. Be prepared to have to sacrifice something. Maybe it is cutting back on spending today to be able to save more for tomorrow. Perhaps it will mean working longer, or moving to a more cost friendly location. There are all sorts of different choices or trade-offs people can make, just be prepared you may have to make some.
- Embrace Life – Regardless of your stage of life, the art of budgeting is balancing enjoyment today with being smart about tomorrow. Make sure you enjoy your journey, and yes, that most likely will involve spending some money.
Good health is a blessing that has financial implications. Regardless of your age today, your older self is counting on your younger self to make wise financial choices.