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Jul 2, 2020

Quitting Time - The Risks of In-Tandem Retirement for Women

by Rita Silvan

Rita SilvanThis is a common scenario: Hubby is 62, the average age of retirement for men in Canada.1 After a lifetime of work, he’s ready to call it quits. He wants to enjoy the fruits of his labour while he still can—travel, golf, sex in the afternoon. He’d like to share these activities with his wife encouraging her to quit the rat race, too. His wife is several years younger. What does she do? If she’s like most women, she probably punches her last timecard and bids her career adieu. What’s wrong this picture?

There are two kinds of negative knock-on effects of retiring early: financial and psychological. First, let’s tackle the emotional ones.

Bored To Death

While many people chafe at the restrictions that work imposes (bossy boss, annoying co-workers, difficult clients, etc.), nearly half of retirees return to work either full- or part-time. The reasons could include financial need due to poor investment returns, inadequate savings, or unexpected emergencies. It could also be driven by sheer boredom. In addition to the financial benefits, work provides social interaction and mental stimulation. It’s unrealistic to expect hubby to dazzle us with witty repartee and stimulating activities 24/7. Feeling that we have no purpose leads to unhappiness and depression which can trigger a waterfall of other problems.2 Trouble is, once we leave the workforce, it’s not easy to jump back in. Age discrimination is illegal in Canada, nevertheless elders are not welcome in many workplaces. Throw in a recession (or depression) and it’s not a pretty picture for those who believe they can simply pick up where they left off.

Now, let’s look at the financial opportunity costs of retiring concurrently.

The Two-Income Trap

As counter-intuitive as it seems, women in two-income households actually save less in their workplace retirement plans. This is the conclusion of a study from Washington D.C.-based Women’s Institute for a Secure Retirement. Two-income households tend to have a higher-standard of living—there is more money coming in and also more going out.3

Having two-incomes may give women a sense of having a safety net which may lead them to save less. Also, women tend to place others’ needs, such as funding their children’s education and helping out aging relatives, ahead of their own.4 This can create an unexpected shortfall when funding a longer retirement period. (A 65-year-old woman in 2019 is expected to live 21.5 more years vs. 19.1 for the man.)5 A study by Statistics Canada reported widowed women with the highest family incomes saw an 8 per cent decline in their wealth five years after the spouse’s death. Almost 70 per cent of the elderly poor are women.6

Prime Time

Women’s lifetime earnings lag for a variety of reasons, including disparities in wages and benefits due to gender-based discrimination, and intermittent paid employment due to raising children and caring for relatives. Nevertheless, more women are in high-paying careers today and are entering their prime earning years in their 50s and 60s at the same time their spouse’s earnings have peaked. High-earning women pay a disproportionately higher opportunity cost than men for leaving the workforce early.7

Unknown Unknowns

Life has a way of throwing us curve balls. Who expects to get divorced in their 60s? As people are living longer some realize they may have 30 more years of marriage to the same person. Hence the rise in ‘silver splitters’, with the greatest uptick in divorces among those age 60-plus.8 Divorce, especially later in life, can be financially devastating. Again, women are more vulnerable to late-in-life separation due to their lower lifetime earnings.

As we already suspected and what the current pandemic has highlighted in a most tragic way is long-term care residences can be a horror show.9 When we’re in our prime it’s hard to visualize that one day we may become dependent on others for our daily care. Long-term care insurance costs are often prohibitive, and even the gold-plated plans may not cover all services. For example, in Ontario, the monthly cost for private accommodation in a long-term care facility is $2,700.10 Monthly rents for upscale senior residences start at $5,000-plus. If we would like to be bathed more than once a week and served something other than instant mashed potatoes, having a secure retirement nest egg is a must for a dignified old age.11

The Great Pandemic of 2020 is an example of a doozy of an unknown. Whether the economic effects will be short- or long-lived is uncertain though consensus is lower-for-longer in terms of economic growth. A retirement nest egg with guaranteed sources of income (such as annuities, government pensions, defined benefit corporate pensions, etc.) is critical for retirees. By working longer, women can achieve considerably higher CPP/QPP benefits, especially if they are able to defer the payments until age 70.

Action Plan…

Enough with the doom-and-gloom. What actions should women take to set themselves up for a better retirement?

Don’t retire. “Unretirement” is where it’s at. Consider working longer, if you can. Or work part-time or seasonally. Any additional income, no matter how small, slows down the depletion of your retirement funds—and may also provide non-monetary benefits such as increased autonomy and confidence.

Visualize your solo life. If you’re in a relationship now, imagine what your life will be like as a single person. Where will you live? How will you spend your time? How much will your lifestyle cost? This exercise will help you understand if you are at risk of a shortfall and whether early retirement is prudent.

Consider hiring a fee-for-service financial planner who can address both your joint goals as well as solo goals. Don’t short-change your future self. Get clarity on the opportunity costs of early retirement.

How reliable are your retirement funds? If your lifestyle spending is based on generating a specific market return, will you still be able to live comfortably on low or negative returns for several years? What is your budget breaking point? Keep in mind that in a divorce, retirement savings in Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) are considered joint family property and are evenly split.12 Consider having an unregistered savings or an investing account in your name only.

Rita Silvan, CIM, is the former editor-in-chief of ELLE Canada magazine. She is a freelance financial journalist and the editor-in-chief Golden Girl Finance (, Canada’s leading digital magazine about women and financial matters. She is based in Toronto and can be reached at

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