Companion Advisor: Retirement
Women and RRSPs: Just do it!
A generation ago, Canadians subscribed to a more
traditional role for women, one in which women married in their twenties,
started a family and may only have rejoined the workforce after their
youngest child was in school. Their retirement was supposed to be provided
for by government programs and by their spouse. These days, women are
increasingly expected to take care of their own financial futures. The
reasons are compelling:
Women tend to outlive men. According to 1990 Statistics Canada data, women
lived to age 80 on average, as opposed to age 74 for men.
Women have less time to build up retirement funds. A study by Monica Townson
for the Canadian Advisory Council on the Status of Women, released in
1995 and entitled Women's Financial Futures: Mid-Life Prospects for a
Secure Retirement, found that women aged 45 to 54 may have willingly given
up some of their working lives to raise their children but almost three-quarters
of them earn their own income now. They have only two decades of employment
to save for their retirement, instead of the four decades that most men
What are women doing about these new realities? Only about 20 per cent
of women who filed income tax returns in 1991 contributed to RRSPs.
As Ann Landers would say, it's time to wake up and smell the coffee!
If you're female and want to ensure financial dignity in your retirement,
seriously consider these suggestions:
Make as large an RRSP contribution as you can afford, every single year,
starting right now. If possible, make up for past years when you couldn't
contribute the maximum. You are entitled to carry
forward unused contributions indefinitely, going back to 1991.
If you are a married woman who has never worked outside the home, educate
yourself on your family's entire financial situation including your assets
Ask your partner about their pension
plan, for instance. After their death it may disappear, drop by half,
provide you with a lump sum or only pay for a few years. Also, inquire
about your partner's life insurance as you may require your own coverage
to carry you through until your own retirement. Determine what you've
got in RRSPs -- yours, your partner's, and spousal plans. You don't want
to have to scramble for any of this information late in life, especially
if you are on your own.
Speaking of spousal
RRSPs, they can help you build equal retirement assets and ultimately
earn approximately equal incomes during your golden years. Your partner
can buy you a spousal RRSP instead of making an RRSP contribution in their
own name. They get the tax deduction, and you get the money in your hands.
As long as you leave the money in your RRSP for at least three years,
the money will also be taxable in your (presumably) lower-income hands
when it comes out. Reverse this strategy, of course, if you make more
money than your partner.
Ensure that you are the designated beneficiary
of your partner's RRSPs. Their contents can then roll directly over into
RRSPs in your name upon their death, without the time and cost of probate.
Even if your marriage is built upon the rock of Gibraltar, arrange for
some assets in your own name. Investments are good for your self-esteem,
and if you apply yourself, you may even give your spouse a run for the
money in financial planning.
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© 1997, Fiscal Agents Money Management Newsletter
25 Lakeshore Road, Oakville, On L6K 1C6.