All The Single Ladies
In her infectious, earworm of a song, “Single Ladies”, Queen Bey (aka Beyoncé) spurred women to fly right and seek greener pastures should their fella happen to be a marriage-shy-guy: “If you liked it, then you should have put a ring on it.”1
Whether by choice or circumstance, more women and men are living solo. According to Statistics Canada, the number of single person households has doubled over the past 35 years to more than 4 million. Women between the ages of 35-64 are more than twice as likely as men to live alone. Widowhood is the most common reason senior women live alone compared to separation and divorce for men.2
Being a single woman may come with some boons—no one’s asking, “what’s for supper?” or snoring through the night—but, financially it’s a downer, especially for women.
One of the biggest tax-breaks a regular couple has is the option to split income and benefits, like CPP, which can lower the family’s overall tax bill. There’s also the ability to share other costs, such as housing and food. Unfortunately, for singles, there are no similar tax breaks and all the living costs— and investment risks— must be borne by just one person.
Retired, single women have a harder go of it for several reasons:
- Lower lifetime wages and therefore, government and pension benefits;
- Higher lifestyle costs (“pink tax” on goods and services, and higher expected standards of grooming);
- Greater longevity than men;
- Less emotional and financial tolerance for higher risk investments
- Less confidence in financial matters
It’s no surprise that single women are 13 per cent more likely to live in poverty than those who live in families.3
According to Leslie McCormick, co-author along with Ardelle Harrison of Bank on Yourself: Why Every Woman Should Plan Financially to be Single, Even If She’s Not, 90 per cent of women will end up needing to manage their own finances at some point due to divorce, widowhood or a lifetime of being single. A study by the Vanier Institute estimated that 41 per cent of marriages will end before their 30th wedding anniversary and that the average age at which Canadian women are widowed is only 56.3
Despite these frightening statistics, as a society, we seem to be in a state of denial about women’s unique financial needs. Perhaps it’s because we’ve all drunk the Kool-aid and believe in fairy-tale endings—a pretty damsel being swept off her feet by her knight in shining armour, (preferably one with a defined-benefit pension plan indexed to inflation), then living happily-ever-after.
If only.
“One of the biggest traps I see is a woman abdicating the financial responsibilities to her spouse,” says McCormick, a wealth manager at a leading Canadian bank. “The majority of women I meet do it. They’re just not involved in the household financial decisions and this puts them at a significant disadvantage.”
Everyone imagines living a healthy, active life of travel, visiting with children and grandchildren, and enjoying hobbies with their partner well into their 90s. But few women spend the time to envision what their retirement will look like if they are the sole person managing the assets. Baby boomer women are likely to live 10-15 years longer than their male partners.
In her book, she recommends that women—whether they’re in a partnership or not— imagine what a single life will look like. She encourages women to have a financial plan and make it a “living plan”, one that’s actually followed instead of one that’s put up on a shelf and never looked at again. By including “tolerance bands” of income, spending, and investment returns, it’s easy to check-in. “Anything within the bands ensures that you are on-track to meet your long-term goals,” she says. McCormick also recommends developing at least three difference sources of income in retirement. These can include government and company pensions, investment/dividend income, annuity payments, rental income, or earnings from a part-time job.
“A lot people think that if they have a company pension or an RRSP, then they’re set for retirement,” she says. “But company pension plans can be underfunded or go bust, for example, think of Sears or Nortel. As for RRSP’s, any funds that are withdrawn are fully-taxed as income. A dollar in a RRSP is worth less than a dollar in a Tax-Free-Savings-Account (TFSA).”
Her advice: You can designate any account a “retirement savings account”; it doesn’t have to be limited to a RRSP. This can give you some flexibility when you start to make withdrawals and then to do them in the most tax-efficient way.
One suggestion for singles is to consider buying an annuity with unregistered funds. In this case, the majority of the payout is designated return-of-capital and is not taxed. Another option, says McCormick, is to consider mutual funds that have a return-of-capital structure. This can help to avoid or limit government clawbacks to Old Age Security payments.
Co-author Ardelle Harrison has been single throughout her life. When she first began thinking of buying a condo apartment, several of her colleagues, who were similar to her in age and salary but married, were shocked. “You can’t do that!” they advised her. They believed that a single woman should wait until she’s in a relationship before investing in a home. Instead of waiting for Prince Charming, Harrison, took the plunge and bought her first property, a downtown Toronto condo apartment. From there, she used the equity in the property to acquire other investment properties that continue to provide her with a steady income stream today in retirement.
Even today, it’s not uncommon for young women to put their financial plans on-hold until they’re married. Perhaps some women think that if they are financially independent this will make them less appealing to men? So, instead of investing their money in a forced savings vehicle (like a mortgage) where it compounds in value, the excess funds dissipate into designer handbags and clothes, luxury holidays, and other short-term lifestyle choices.
The key take-away is that creating financial independence takes time. “The one thing that transcends occupation and income level is diligence,” says McCormick. “My clients who have achieved substantial wealth have done so over a long period of time. It doesn’t happen in six months. The decisions we make in our 20s and 30s are important, so you have your working career to build wealth. Starting to do this in our 50s is a lot harder.”
As American activist Marian Wright Edelman4 said, “You can’t be what you can’t see.”5
As a society, we need to empower woman of all ages— especially younger women with a long runway of earnings and investing ahead of them—to be captains of their own financial ships. One way to do this is to put their successes in the spotlight. Not only those of extreme Kardashian-level wealth but of regular women making sound financial decisions as a form of self-care, day-by-day, year-by-year. And, whether they’ve got a ring on it, or not.
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 (www.goldengirlfinance.com), Canada’s leading digital magazine about women and financial matters. She is based in Toronto and can be reached at rita@ritasilvan.com.
End Notes:
https://www.youtube.com/watch?v=4m1EFMoRFvY
https://www150.statcan.gc.ca/n1/pub/75-006-x/2019001/article/00003-eng.htm
https://www.google.com/shopping/
https://en.wikipedia.org/wiki/Marian_Wright_Edelman
https://www.goodreads.com/quotes/536048-you-can-t-be-what-you-can-t-see