Will you have a gender wealth gap at retirement?
What women need to know as they save for their future.
By Lindsay Sparrow 21 January 2020 4 min read
Women are earning and controlling more financial assets than ever before, and this trend continues to gain momentum. It's predicted that by 2026 women will control close to half of all accumulated wealth in Canada1.
Along with celebrating women's increased control over financial assets, we’ve also seen a decrease in the gender pay gap over the last few decades, for a number of reasons. There’s more women in the workforce, increased education levels, fewer women leaving the workforce upon marriage or motherhood, among other considerations. With all of the strides made towards gender pay equality, there is a larger conversation that is often overlooked - the Gender Wealth Gap. The Gender Wealth Gap can dramatically impact the quality of a woman's retirement, so it deserves our attention.
Women need to understand how the Gender Wealth Gap can impact their investments, family and career, being mindful of the wealth gap as they prepare for retirement and statistically living longer than their male counterparts. This article is meant to serve as an educational piece to provide women with strategies to achieve the retirement of their dreams, with an understanding of the wealth gap they may face.
What is a Gender Wealth Gap?
A Gender Wealth Gap starts for women with a discrepancy in pay from their male counterparts, or what is referred to as the gender pay gap. Statistics Canada reported that women in Canada aged 15 and older earned $0.87 for every dollar earned by men, as measured by average hourly wages.2
The gender wealth gap takes into account the compounding impact discrepancies in pay can create throughout one's career. It takes into account a number of factors that create a gender wealth gap across the span of a woman’s career: hourly wages and salaries are used to determine bonus amounts, stock options and retirement benefits, such as pensions and group RSPs.
The reality is a wealth gap can impact anyone, regardless of gender. The Oxford dictionary defines a gender gap as the discrepancy in opportunities, status, attitudes, etc. between men and women. National studies typically use a sample from the entire working population of a country. In fact, the word “gender” should be corrected to “sex”. The gender wealth gap should be referred to as a sex wealth gap, as gender refers to an individual identifying as male or female.
What contributes to the Gender Wealth Gap?
The gender wealth gap doesn’t just come down to dollars and cents earned, there are a number of events throughout a woman’s life that can add to her Gender Wealth Gap. These could include career gaps that interrupt an individual’s working years, resulting in missed opportunities to build skills, which can result in fewer promotions or salary increases.
While career gaps can affect anyone, women are three times more likely than men to have breaks in their career, whether it be taking time off to raise children or caring for an ill spouse or aging parents. While men are stepping into these roles more and more, the effects of the wealth gap on women's futures and their families is important to understand.
Career gaps: The biggest challenge we’re not talking about
While taking a career gap may not always seem significant at the time, it can have a compounding effect. When studies calculate the gender pay gap, the collective result is astonishing. A study by Merrill Lynch shows that these considerations result in women having more than 1 million dollars less than a man at retirement.3 While different studies cite different amounts, the majority of studies consistently show a gap affects a high number of women throughout their life with a compounding challenge at retirement.
We all know that life throws curve balls, and planned or not, life happens. In those moments, we have to make decisions that are best for our families. Career gaps are a realistic part of life. Having time to be with your children when they are young, or taking care of a family member in their time of need cannot be quantified in dollars and cents as you can never get those times back. That said, appreciating how these gaps impact your future and planning accordingly is what’s most important.
What can women do?
To better understand how you can reduce or eliminate your wealth gap, read “Confronting the Gender Wealth Gap - what women can do today”. Talk to your Financial Advisor about your potential wealth gap. The right advisor will help you make the best decisions today to reduce or eliminate your potential wealth gap, allowing you to plan for and live the retirement you’re dreaming about. Taking time away from your career is an important part of people’s lives, and being prepared to ensure it doesn’t affect your long-term investment strategies is the best way to care for yourself and your family.
ATB Wealth consists of a range of financial services provided by ATB Financial and certain of its subsidiaries. ATB Investment Management Inc., ATB Securities Inc., and ATB Insurance Advisors Inc. are individually licensed users of the registered trade name ATB Wealth. ATB Securities Inc. is a member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.