Reflecting back on the social and economic landscape three or four decades ago, some very strong gender differences between men and women are evident. Gender gaps were especially prevalent in areas such as employment, job types and salaries, as well as in the level of responsibility, confidence and knowledge regarding financial decision-making. From an employment standpoint, consider the fact that in 1976, the employment rate for women hovered at approximately 40 percent, whereas the rate for men at that time was just over 70 percent. As of 2016, the employment rate in Canada was 57.5 percent for females and 64.9 percent for males.1 More specifically in reference to women between the ages of 25 and 54, the employment participation rate is currently above 80 percent — this marks an increase of about 30 percentage points since 1976.2 Women also now comprise roughly 47 percent of the workforce.3 In general, this increased participation of women in the workforce is one of the most significant social trends of the last four decades, but the progress and shifts extend well beyond that. Women represent 56 percent of students enrolled at Canadian post-secondary institutions;4 statistics indicate that of all small and medium-sized enterprises, just under half are partially or fully owned by women;5 and, approximately one-third of women out earn their spouses.6
As the wealth among women continues to grow within Canada, so too does its significance at a variety of levels. Beyond the overall female empowerment and motivation reinforced by these statistics, it is vitally important for women to recognize the substantial impact of these realities on their individual situations and then apply them from financial and wealth transfer planning perspectives. In turning a focus to the shifting gender trends both socially and financially, key areas of relevance for many women, now and in the coming decades, may lie within the realms of wealth inheritance, accumulation and preservation. And more broadly as part of the planning process, this is where it becomes so vital to consider life events and potential situations that may apply particularly to women at various stages — whether those are personal, career or family related.
Women as potential double inheritors
When it comes to the upcoming historical wealth transfer taking place over the coming decades, the relevance as it relates particularly to women cannot be overlooked. One of the key reasons behind this significance is that many women may stand to inherit twice — that is, from their parents’ generation and from their spouses or partners, given that statistics are showing women have longer life expectancies than men. While the overall difference in life expectancy between men and women in Canada is approximately four years,7 there is research that also indicates widowed females in the Baby Boomer generation may live an additional 16 years, as there was a greater tendency for women in that demographic to marry older men.8 Furthermore, findings suggest that at some point in their lives, 90 percent of Canadian women will be the sole financial decision makers, with exclusive total control over their finances.9 On a grand scale, these statistics strongly highlight the critical significance of planning for wealth that may be inherited and then ultimately how it will be transferred, given that women will be key players in the estimated transfer of over $400 billion to inheritors in Canada over the next generation.10
Despite these eye-opening trends, however, it seems the majority of women are not prepared when it comes to planning ahead for wealth transfer. In fact, findings from RBC Wealth Management’s (RBC WM) recent “2017 Wealth Transfer Report” noted that among female respondents, only 22 percent have a full strategy in place. Interestingly, however, that statistic exists in contrast to what many women view as important in wealth transfer, as female respondents who had already received an inheritance noted the “smooth and efficient transfer of wealth to me” as the type of support they valued most during the process. In general, what this seems to indicate is that values unfortunately aren’t quite translating into action when it comes to planning.
The impact of wealth accumulation on planning needs
With the professional and financial successes females have achieved in the workplace, generally speaking this marks a promising and progressive time for women in Canada, whether preparing for future employment, entering the workforce, or already established in their careers. Women are increasingly educated, more women hold positions of influence and are leaders in their professions, and there are growing numbers of female entrepreneurs. What all these trends point towards is that more and more women are poised to accumulate sizeable assets and wealth and therefore continue to control a greater portion of overall wealth in Canada. With this in mind, it is very important for women from young adulthood and throughout their working years to be proactive and informed with their planning, recognizing that their needs may be very different, not only from men’s, but also from women’s of generations past, when you factor in the numerous changing trends and roles in society. What it comes down to then is identifying needs and goals from personal and family standpoints and pairing that with proper knowledge and support to implement approaches that will enable women to both grow and protect their wealth.
Despite these emerging financial realities among today’s women, however, findings from the “RBC WM 2017 Wealth Transfer Report” suggest that many women may feel somewhat uncertain when it comes to financial decision-making. Specifically, it was found that women overall have a lower level of confidence in knowledge of wealth and money topics — specifically among female respondents, only 48 percent feel confident (whereas 65 percent of male respondents feel confident in their knowledge), which may have significant implications for women who are unprepared to accumulate, take on and manage increased wealth.
Life-stage planning for Millennials
For women (and men) who are part of the Millennial demographic (loosely defined as those born between 1981 and 2000), this is a time in which it is especially important to develop a strong understanding of saving, spending and investing for the future, with numerous life events often taking place. Particularly for females at this stage, there are specific circumstances based on recent societal trends that may necessitate different planning needs. For example, many women may get married later, or potentially not at all; some women may choose to pursue additional or continued education to further themselves in their careers; or, some women may become the leading or sole breadwinner in the family. What these examples illustrate is that while each decision or achievement may be personal or professional in nature, it will have an impact financially and may lead to the need for different financial or investment approaches, whether short- or long-term. As such, it is important to define what those decisions mean financially speaking, and then recognize that they need to be mapped out accordingly in an overall wealth plan.
Another key example is women who are specifically planning to have children, as particular consideration should be given to the financial impact of taking maternity leave. In Canada, maternity and parental benefits are available for a maximum of 50 weeks (subject to qualifying conditions). For most people the basic rate is 55 percent of average insurable weekly earnings, up to a maximum (which as of January 1, 2017, is $51,300).11 To obtain complete details and information about maternity and parental benefits, please visit the Government of Canada website. Another factor to recognize as part of maternity leave planning is that employer benefits may greatly vary; while some companies may offer additional coverage or maternity “top up,” other organizations may not offer any sort of supplement. While individual circumstances may vary in this regard, the takeaway message is that these types of income considerations should be accounted for in overall wealth planning, and it is important to have your own personal situation appropriately evaluated by a qualified planning professional.
For additional planning information for those in this age demographic, please view the accompanying article in this edition of Perspectives, “Financial planning tips for Millennials.”
Longevity, health and growing trends for wealth preservation
Given the large-scale shift in Canadian population demographics, as more and more Baby Boomers shift into retirement, key aspects for women in this age group tie back once again into life expectancies and what that may mean from a financial perspective, along with certain health considerations specific to females. In general, life expectancies overall have been increasing, and this means both men and women may need to plan for a potentially longer retirement and factor in the increased likelihood of health issues or greater need for healthcare support in their later years. Specifically for women, given the combination of a potentially larger accumulation of wealth and the potential likelihood of one if not two inheritances, there should be a heightened focus not only on how to effectively manage the greater control over family finances, but also ensuring that wealth is preserved in a way that best suits individual needs and circumstances — throughout retirement and in creating a lasting legacy for generations to come.
Age-related cognitive issues and conditions are another central consideration for women as they plan for, near or reach retirement, as unfortunately, females are much more likely than men to succumb to conditions such as Alzheimer’s, dementia and depression. Here, it is important to recognize the significance and implications of health issues on financial well-being, a topic Perspectives Magazine further discusses in the article, “Female brain health and financial health– the important connection.”
With aspects such as these in mind, women may want to give increased consideration to retaining and preserving their wealth for longer. This thinking seems to resonate with a number of Canadian women, as 57 percent of respondents in the “RBC WM 2017 Wealth Transfer Report” noted that they intend to pass the entire amount of their wealth to the next generation upon their death, with the top reasons being needing the wealth to fund the lifestyle they want and not feeling they have enough to give away gradually. In the big picture, what these findings may indicate is that there is a growing recognition of the costs of retirement, longer life expectancies, health concerns in later years, and the rising costs of healthcare.
Planning tip for spouses or partners – The Family Inventory
Among a number of families, one key area some may overlook is the importance of ensuring each spouse or partner is fully informed and up to date regarding wealth transfer and estate plans, documentation and account information. Given the potential for increased longevity among the female demographic, this may be an especially critical consideration for women. Some individuals may assume their spouse already knows these details, but there are often scenarios in which only one spouse handles certain accounts, investments or assets, for example. Therefore, a beneficial starting point is to ensure you and your spouse compile a collective inventory and list of information pertaining to your family’s accounts, advisors, assets, pension information and insurance policies. To help you in gathering a comprehensive list of this information, RBC WM offers The Family Inventory, a useful guidebook for both logging and updating your financial details.
Note: This information has been partially excerpted from the RBC Wealth Management Special Report, “Five key questions in estate planning and wealth transfer”.
Helping individuals and families with comprehensive planning
The Family Inventory is a tool RBC WM Canada has created to assist individuals and families in the planning process, as well as to help manage the communication aspect when it comes to sharing important information as they relate to plans. This guidebook functions as a useful reference and helps ensure individuals have considered all aspects of their financial affairs. And given the many, and sometimes complex, factors and components that go into overall planning, this also serves to highlight the value offered by professional planning services. Through understanding and appropriately accounting for individual needs and circumstances, and then developing customized, comprehensive plans, these services help individuals and their families in tracking towards and reaching their financial and wealth goals. Don’t have an RBC advisor and wish to find one? Please visit our website.
Empowerment in knowledge
Within the “RBC WM 2017 Wealth Transfer Report”, when it comes to financial and wealth transfer topics, women are more likely than men to learn through informal means, with 52 percent of female respondents noting they learned mainly through family. At the same time, women are also more collaborative in their learning style, with over half seeking out others to supplement their knowledge. These findings demonstrate that women may benefit from pursuing more formal sources of financial education to help build confidence levels in decision-making, and this is an area where qualified professional advisors may be valuable resources for offering expert knowledge, information and guidance.
When it comes to the next generation, whether it’s budgeting, investing or wealth transfer, women respondents across the board think children should be learning about these topics at an earlier age. This holds true among other statistics within the report, as earlier learning boosts financial confidence. In general, women are also more proactive than males when it comes to educating and intending to educate their children on wealth and money topics. These statistics give a promising indication that women are increasingly recognizing the value of financial learning, improving financial literacy and awareness, and in being proactive in passing on that education to the next generation in age-appropriate ways.
As a demographic, women have taken such great strides in closing and eliminating gender divides in employment, professional leadership, education and business ownership, as well as becoming fully active and equal in regards to earning, building and controlling wealth and financial assets. These large-scale shifts and wealth trends are increasingly pushing planning considerations for women to the forefront in Canada, yet there is still ground to be gained in helping many women make the critical connection. The expansion of women’s wealth power necessitates a need for increased focus on planning, and what it comes down to is aligning social and financial realities with appropriate life-stage and life-event planning to help ensure wealth is maintained, managed and passed on in the most effective ways.