Why Canadian Women Need to Save More Money than Men for Retirement - Slice (2024)

FAQs

Why Canadian Women Need to Save More Money than Men for Retirement - Slice? ›

1. How does longevity affect your retirement money? Based on our research, if everything else stays the same, a woman who retires at age 65 is likely to face a higher risk of not meeting her income target for retirement compared with a man. In Canada, women have shortfall risk of 34% compared with 29% for men.

Because they earn less, women often are unable to invest as much as men. However, in order to make up for other discrepancies in retirement benefits, women may actually need to invest more. And because women often leave work to bring up children or care for elderly relatives, they clock fewer total work hours.

How much does the average Canadian have in an RRSP at retirement? While the average amount held in an RRSP is $144,613, for households aged 65 and up, that amount is $283,000 (including RRIFs).

According to this rule, you'll need 70% of your pre-retirement household income each year in retirement for 25 years. For example, if your household brings in $150,000 in the year before you retire, then you'll need $105,000 annually. Multiply that by 25 years and your retirement savings goal would be: $2,625,000.

Let's look at Canadian women: Imagine 1,000 women at the age of 65. Ten years later, 929 are still alive (the yellow bar). By 90, more than half are still alive. The last survivor is expected to die between 109 and 115.

And saving for retirement is only becoming more difficult as Americans deal with rising costs. Escalating housing, healthcare, and long-term care costs in retirement are creating financial obstacles for many Americans.

Gender pay gap

Women, on average, earn less than men, which makes it harder to save for retirement. On top of earning less money, women are more likely to take time off from work to raise children or care for elderly relatives, which can further reduce their earning potential.

What is a good retirement income? When calculating your retirement income, it is recommended that you plan for 70% of your current income. It is likely that with no longer commuting for work as often, your pre-retirement costs will decrease, and you will be able to live quite comfortably on this amount.

For example, assume you earn $100,000 per year before retiring. Using the 70% rule, you will need approximately $70,000 ($100,000 x 70%) in annual income to maintain your lifestyle in retirement. Going back to Rule 2, it implies you need: ⇒ $70,000 x 25 ⇒ $1.75 million in retirement.

Apply the 4% Rule to Your $500,000

The “four percent rule”—a widely accepted financial rule of thumb—states that your savings should last through 30 years of retirement if you withdraw 4% of your nest egg during the first year of retirement and then take that amount each year thereafter, adjusted for inflation.

Can I retire at 60 with $500 K in Canada? ›

Overall, retiring at 60 is doable with $500,000 but it may not be doable for you. It really depends on your personal living situation and what your potential expenses are going to be.

Here's the bottom line: the cost of living in the country has become unaffordable for many. In 2023, there were numerous news reports of growing line-ups for food banks, students dumpster-diving, people moving into shelters and tent communities because they cannot find accommodation.

However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.

The immigration path to Canada may be a little bit more tricky if you don't already have family living there. There is no retirement visa in Canada; however, if you don't plan on staying in Canada year round, you could apply for a temporary visitor visa.

Universal Healthcare System: Canada's publicly funded healthcare system ensures that citizens and residents have access to necessary medical services without the burden of high healthcare costs. Regular medical check-ups, early disease detection, and timely treatment contribute to longer life expectancies.

Life expectancy at birth in Canada 2021, by gender

Particularly noteworthy is the life expectancy of women at birth, which has the highest value of 84.67 years.

Aim to save at least 15% of your income annually for retirement.

Women face unique challenges when it comes to retirement planning, including the “caregiver penalty,” a longer life expectancy and higher healthcare costs. A financial advisor can help design a financial plan that is reasonable and achievable, taking some of the stress out of this major life event.

Women typically have less money saved for retirement than men. Women generally earn less than men and can have career gaps due to caregiver roles that can lead to lower savings, lifetime wages, and Social Security.

Women are at greater risk in retirement. Here are ways to overcome a savings shortfall. Women have about 44% less saved by the time they retire, research shows.