Work & Money

Women need to save more than men for retirement – here's why

When it comes to retirement savings, men and women are not the same.
(Credit: iStock/Getty Images)

This article was originally published April 29, 2017.

When it comes to retirement savings, men and women are not the same. Though personal finance experts (including myself) love to say "save 10 per cent of after tax income into your RRSP and you'll be fine", a new paper published by Diane Garnick, an income strategist in the U.S, says that's not the case for women. And for reasons that are all too similar here in Canada too. It suggests women should be socking away almost 18 per cent of their income to enjoy the same retirement lifestyle as men who save 10 per cent of theirs. Furthermore, a recent study published by The Broadbent Institute found 28 per cent of senior women in Canada are living below the poverty line and they see that getting worse going forward. It's important that women understand why they need to save more money for their retirement.

Women live longer

This is the most obvious reason but that doesn't mean that it's not overlooked. According to Statistics Canada the average life expectancy for the total Canadian population is projected to be 79 years for men and 83 years for women. Living four years longer means women have more years to save for. If you use 65 as a marker, women can expect to live in retirement 28 per cent longer than men. Think about saving more for extra living costs, and include higher expenses for health care.

Women are more likely to leave the workforce

When it comes to raising kids and taking care of elderly parents, it's often women who leave their job for a period of time to do so. According to Garnick, women on average work 28 years in their lifetime while men work 38. That means there are 10 years that women are not making any income of their own, reducing their ability to save. One solution for women who take themselves out of the workforce might be having their working partner contribute to keep their RRSP growing during that time. Still, employees who leave the workforce and then return to their job are required to "buy-back" the months they were not contributing to the company pension fund, so ideally, company policies around pensions would consider this disparity too.

Women tend to play it safe

Women tend to lean towards conservative, guaranteed investment return products, like GICs and high interest savings accounts. In order to make a better return on investment, women who have a 25-year horizon before retirement would be better off focusing on good quality stocks. History shows by having a well-diversified portfolio or buying ETFs that follow a broad market over time, investors can historically expect better gains then keeping their money in fixed income products.

The gender wage gap is real

Finally, the percentage of savings that should go toward retirement cannot be the same for men and women because they do not earn the same amount. According to Statistics Canada data released this year, Canadian women earned 87 cents an hour for every dollar made by men in 2015.