How Multiple Gender Bias’s Steal Your Financial Future
As a financial planner, I've long used terms like "navigating unique challenges" to encapsulate financial planning for women. In fact, that’s how I started out writing this post. I intended on highlighting the unique issues women face, and how women ourselves can mitigate them. In essence, highlighting the power of financial planning. I 100% do believe and have seen the power of financial planning, however, as I was writing, I noticed myself becoming more and more outraged that we as women have so many extra hurdles.
Women should not have to make special planning considerations simply because of their gender. It's unjust to be disadvantaged by birthright alone. As financial professionals, we must break the habit of normalizing these disparities with politically correct euphemisms that obscure the truth. Yes, women have different planning needs, but should we have financial disadvantages? Instead of planning around how to "deal with" inequalities, we must demand unequivocal equal treatment. Period.
Financial planning for women isn't just navigating "unique challenges"—it's confronting outrageous hurdles that extend far beyond individual choices. These injustices not only shape immediate earning potential and career trajectories but also cast long shadows over retirement savings and economic security. Tackling these issues demands more than awareness; it demands action. It's time to dismantle these entrenched disparities through bold reforms, corporate accountability, and societal change
So let’s start the conversation with a reality check. Here in 2024.
1. The Gender Pay Gap:
As of 2024, women in Canada earn approximately 82 cents for every dollar earned by men. This disparity can have a profound impact over a woman's lifetime earnings, affecting her ability to save for retirement and invest for the future.
2. Career Pauses for Childbearing and Caregiving:
Many women take time off work to raise children or care for elderly parents. On average, women in Canada spend 3.9 years out of the workforce for caregiving reasons, compared to 2.6 years for men. These career pauses can result in lower lifetime earnings, reduced pension contributions, and diminished opportunities for career advancement.
3. Life Expectancy:
Women typically live longer than men, which means they require more retirement savings to sustain their lifestyles over a longer period. According to Statistics Canada, the average life expectancy for women in Canada is 84 years, compared to 80 years for men.
4. The Pink Tax:
The "pink tax" refers to the extra amount women often pay for certain products and services compared to men. Studies have shown that products marketed to women, such as personal care items and clothing, can cost more than their male equivalents. Over time, these additional costs can add up and impact a woman's overall financial picture. Studies such as the European Commission's analysis found that products for women were priced on average 7% higher than comparable products for men.
Since numbers don’t lie, let’s put some perspective in by showing the numbers instead of just words.
Case Study: Sara vs. Yamir
Sara and Yamir, both starting their careers at age 26, earning $80,000 annually in British Columbia, Canada, doing the same work for the same company in the same role. They each have equal annual lifestyle expenses of $45,000 and plan to retire at 65. Let’s assume that after paying for their lifestyle expenses, Sara and Yamir save the rest of their income for their long term retirement. Here's how their financial journeys might unfold:
Income and Expenses (Including Pink Tax Impact and Updated Tax Rates):
Sara: Earns 82% of $80,000/year due to the gender pay gap, resulting in an annual income of $65,600/year. Her combined federal and provincial average income tax rate is 17.03% in BC.
Net Income: $65,600 - (17.03% of $65,600) = $54,514/year after tax.
Expenses (including Pink Tax): $45,000 + 7% = $48,150/year.
Yamir: Earns $80,000/year, and faces a combined federal and provincial average income tax rate of 19.04%.
Net Income: $80,000 - (19.04% of $80,000) = $64,752/year after tax.
Expenses: $45,000/year.
Savings for Retirement:
After deducting annual expenses from income:
Sara: Saves $6,364/year.
Yamir: Saves $19,752/year.
Impact of Career Pause:
Sara: Takes 1.5 years MORE off for caregiving than Yamir, contributing nothing to savings during this period.
Yamir: Continues to save $19,752/year consistently as he took zero time off for caregiving.
Long-term Financial Impact:
Assuming a 7% annual return on investments:
Total Savings at Age 65:
Sara: $1,077,365
Yamir: $2,196,243
A difference of $1,118,878 over their working lives.
But let’s take this a step further. Let’s see how this inequality translates into income in their “golden years”.
Assumptions:
Sara retires at age 65 with savings of $1,077,365.
Yamir retires at age 65 with savings of $2,196,243.
Sara's life expectancy is 84 years (19 years in retirement).
Yamir's life expectancy is 80 years (15 years in retirement).
Calculations:
Annual Withdrawals:
Sara: Divide Sara's total retirement savings by her remaining life expectancy:
Annual Withdrawals = $1,077,365 / 19 = $56,705 per year
Yamir: Divide Yamir's total retirement savings by his remaining life expectancy:
Annual Withdrawals = $2,196,243 / 15 = $146,416 per year
Nearly 3X’s that of Sara’s
** very simplistic calculations for demonstration purposes - does not factor in things like investment returns in retirement, inflation, etc.**
Financial planning for women isn't just about numbers on a spreadsheet; it's about confronting the stark realities of systemic inequality that shape every stage of a woman's financial life. From the appalling gender pay gap that persists despite decades of advocacy to the insidious pink tax that quietly siphons away earnings, women face not just challenges but outright injustices. These disparities compound over a lifetime, affecting earning potential, career trajectories, and retirement security. As we confront these issues head-on, we must demand more than acknowledgment—we need action. It's time to dismantle these barriers through policy reform, corporate accountability, and societal change. By amplifying our voices and advocating for equitable practices, we can pave the way towards a future where financial empowerment knows no gender, ensuring every woman can retire with dignity and security.
