Today, women have careers in all areas of the economy. In addition to holding down a job, they also often continue to be responsible for handling the family finances. It is also surprising to note that many women are not thinking about planning for their retirement or don't know how much they will need to retire comfortably.
To help you think more about this issue, here are five essential questions and answers about retirement savings:
When should I start contributing to a retirement savings plan?
Right now. It is preferable to start as soon as possible. A young woman who invests $1,000 a year at a rate of return of 8%, between the age of 25 and 35, i.e. for 10 years, will accumulate close to $73,000 by age 55.
Applying the same strategy between age 35 and 55, i.e. for 20 years, would accumulate slightly more than $49,000 by the same age. Which scenario do you prefer?
Will my pension plan at work be enough?
So you have a pension plan at work. That's great! However, depending on the type of plan and how many years you participate in it, it will only provide a portion of your retirement income. Today, it's a fact that only a minority of workers stay with the same employer for their entire career and receive a full pension.
By contributing to a personal retirement plan, you can ensure that you will maintain the same standard of living at retirement as you had during your working years. You will also be able to realize your dreams: travel, lakefront cottage, golf or other well-deserved pleasures.
Will I be able to count on the government pension plans?
In part only. The public pension plans provide basic income. In October 2007, the average annual annuity paid under the Canada Pension Plan, or the Quebec Pension Plan, to a person who retires at age 65 was $5,677.08 whereas in January 2007 the maximum annuity was $10,615.
In terms of the Old Age Security benefit, the average annual amount payable under the plan in October 2007 was around $5,716.32. Would you be able to achieve your retirement goals or even maintain your current purchasing power with this level of income?
How can I save for retirement?
Retirement savings mean financial planning and discipline. When setting your family budget, don't forget to pay yourself!
Setting a budget first consists of establishing financial priorities. Add another budget item to the list: "My well-deserved retirement". Treat your personal retirement plan in the same way you treat your other bills (rent, mortgage, phone bill, etc.).
Automatic monthly debits can be helpful. If unexpected expenses arise, you can reduce your automatic debits without cancelling them and it will be easier for you to catch up later on.
How much do I have to save for retirement?
Today, most retired women live to age 80. Obviously, some live a lot longer. Depending on when you want to retire, you should therefore plan to have income for 20 to 35 years.
The initial years of retirement are also usually devoted to realizing projects that are dear to us. However, these latter years often involve a progressive decline in health and loss of autonomy. Each of these periods has its own financial requirements.
Desjardins Financial Security has developed a calculator to help you determine how much you should save. Don't hesitate to use it!
