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Navigating-Retirement

It's different for women

Money means many things to people. For some, it’s a way of keeping score, for others it’s the promise of future security. Some yearn for the status that money can bring, while others value it simply for what it buys. 

We all have unique viewpoints about money, which ultimately come from our parents or guardians, the economic environment in which we grew up, our friends and peer groups, and our experiences. For most of us though, it’s a combination of factors.

The management of money is also looked upon through differing lenses, and nowhere is this more apparent than the different ways women and men think about financial advice, investments, and planning.

It’s a well-known fact that women generally live longer than their male counterparts. Combine that with high divorce rates means a greater number of women manage their finances alone. In fact, nearly all women will be solely responsible for their finances, and potentially that of their families, at some point in their lives.

To be clear, whether you are male or female, your investment choices are the same. What differs is the approach to financial management, and your perception of the priorities. 

The old school model meant the husband managed the investment decisions and future planning, while the wife took care of the household and the day to day. This is no longer the case, and you would need to go a long way back to find even a hint of such a reality.

My experience has been that whereas one spouse or the other will be the primary contact, the decisions are generally made on a collaborative basis unique to the couple. When not, it’s often the female partner who takes responsibility for managing the financial process.

In a recent US survey, commissioned by Russell Investments, of Gen X (32-47 years) and Silent Generation (67-80 years) women, the top three concerns about retirement were as follows:

Having enough money for healthcare expenses in retirement

Having enough money to pay for home care or a nursing home

Having to reduce their lifestyle or spending in retirement because of a decline in assets 

While these are issues common to both men and women, there are some marked differences in the priority of the issues, and the way that women will manage them.  

Men tend to be more optimistic about their finances and the markets than women, even when the optimism isn’t warranted. From a planning perspective, women put a greater emphasis on reducing their debts and expenses, and ensuring that they will have enough to live on. 

We men often struggle with accepting help when making decisions, and too often let our egos influence our choices. Women on the other hand, are much more comfortable asking questions and seeking out solutions from others. 

These differences go to the heart of the relationships that women have with their advisors. Women are more collaborative, and put a greater emphasis on detail and being heard and understood. They are generally more realistic about their situations than men.

What does all this mean? It points to a change in the way that financial services will need to be offered if it is to provide effective solutions for the whole market. It’s no longer a one size fits all kind of business. Many advisors have always operated at this level, but for those who haven’t - well, the times, they are a changing. 

Questions or comments: [email protected]

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There's more to the picture

The good news is, we’re living longer. Unfortunately for many, that’s also the bad news. 

As life expectancies increase, so do the incidences of chronic and incurable progressive diseases. Medical science can keep us alive, but hasn’t discovered how to keep us healthy if we aren’t willing to care for ourselves.

Many of the health challenges we face today are preventable.

As the ability to treat and cure diseases caused by ageing advance, so does the understanding of the steps needed to prevent them in the first place. 

It’s never too late to start taking better care of yourself, but the earlier you begin, the less painful the experience is likely to be. The older you get, the harder it is to implement changes into your life and the more your body will rebel. 

The four areas on which to focus as we approach or continue in retirement are: 

  • Lifestyle
  • Intellectual stimulation
  • Socialization
  • Financial

The actions taken today will pay-off when we need them most: When we are unable to go back and do it again.

Adopt and maintain healthy habits and positive lifestyles

  • Don’t smoke
  • One drink a day
  • Exercise regularly: Weights, cardio and balance activities
  • Maintain a healthy weight
  • Eat more natural foods and less packaged stuff: Watch your salt, sugars and fats
  • Get regular check-ups
  • Avoid falls and head injuries (wear your helmet when you bike and ski)
  • Avoid medications that cause confusion

Stay intellectually stimulated, and stay social

  • Continue to pursue your hobbies and interests
  • Strengthen your family relationships
  • Resolve personal conflicts
  • Take courses, keep learning 
  • Know your physical limitations, ask for help
  • Don’t let your limitations define you

Be wise with your money 

  • Plan before you retire
  • Manage your investments and assets with care, don’t speculate 
  • Have adequate insurance coverage
  • Decide in advance what your living arrangements will be in the future

Maintain your dignity and your health

  • Find a doctor whose practice focuses on the care of older adults
  • If relocating, make sure the healthcare system you are adopting is elder-care friendly
  • Tell your family and physicians your health goals
  • Consider long-term care insurance, if you can afford it
  • Have an advance-care directive in writing

Money and directives aside, the foundation to a healthy retirement is built on maintaining your health and taking all the steps you can today to prevent injury and disease in the future. 

It’s no different than your car, if you want your vehicle to last a long time, you need to take the same steps you would with your body: Put good things into it, service it regularly, repair what you can, don’t push it beyond its limits, and don’t take stupid chances.  

The only difference - we can always buy a new car.

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In a panic? Change gears

The way it was

The choice used to be obvious. If you wanted to protect your principal, or generate a regular cash flow, you were probably an income investor. If you wanted to see your fortune expand, and had no need for the additional income, you were a growth investor.

Income investors looked to fixed income vehicles to provide them with security and cash flow: Bonds, GICs, savings accounts, term deposits, and preferred shares. Growth investors turned to stocks for their returns, looking for increases in the prices of their securities to fuel their return objectives. 

As mutual funds grew in popularity, and, in turn, ETFs, investors were able to mix the two objectives and own what were called balanced funds. These were portfolios that were allocated across both equity (stocks) and fixed income (GICs, bonds, preferred shares) assets. Buzzwords often used with these investments were words like ‘asset allocation’ and ‘efficient frontier’ - fancy terms for not putting all your eggs in the same basket.

And the way it is

The financial crises of 2008 came along after that, and things changed. Interest rates now seem to be hovering at permanent lows, as central bankers (think Janet Yellen or Stephen Poloz) continue to fight to keep challenged economies on track. Stock markets have been increasingly volatile with S&P/TSX composite still well below the dizzying heights of 2008.

So what’s an investor to do? 

Low interest rates may be good for borrowers, but for those who rely on the income from investments, it means either accepting rates of return below 3% if they want principal guarantees, or venturing into different investment arenas. These may offer better income distributions, but also increase the level of risk your principal is exposed to. 

For growth investors, the lack of momentum in Canadian share prices has pushed many to dividend and income paying securities to supplement the lack of price appreciation. If one is going to wait for markets to move, getting paid to wait is better than just waiting.

Be flexible

The answer is, then, to be flexible. Don’t rule out opportunities simply because of past convention.

Bicycles today come with a set of gears, not because they’re fun to shift, but because the grade of the landscape is always changing. It is easier and more efficient to change gears than to get off your bike and push it up a long hill. It is similar in the markets: The appearance of change is not a sign to stop or give up, it is simply an opportunity to use something better suited to the challenge.



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Advance to Go

When bad markets happen to good people, they, much as our prehistoric ancestors did, see their cortisol levels rise and stress levels increase, and they start actively thinking of ways to make it stop.

Unfortunately, the market doesn't care.

It will continue to do whatever it is doing, regardless of how much worry or fear we have. So when the prices start falling, and the value of your portfolio starts to decrease, don’t panic. Take it as a good time to ask yourself a few questions.

For the unprepared, the question is usually, ‘what should I do?’ 

Should I sell everything, take my losses, go to cash, hunker down and wait out the storm? 

Or, should I show no fear and start buying at these great sale prices? After all, how far down can it go? 

If you hear these questions rolling around in your own head, the best thing to do is to stop thinking about the market and start thinking about your approach to investing:

Are you a speculator or an investor?

Imagine that you're playing Monopoly. Your favourite game piece (is it the sports car?) is sitting at the start. You've been playing for awhile, so hotels and houses are littered along the properties, the railroads and utilities are all bought up, you've got $500, and you haven't hit Free Parking the whole game. You feel a bit as though you're walking through a minefield.

Your answers to the following questions will determine if you get around the board or not. 

First question: Do you have a plan?

Think for a bit, and remember that before you invested the money, you had reviewed your objectives for the funds and decided that a portfolio using a balanced strategy would be best, given your feelings towards risk and volatility. Excellent response, move ahead ten spaces and hit the corner where you're just visiting jail - a safe haven when you're surrounded by everyone else's hotels. 

Second question: The words ‘balanced portfolio’, what does it mean to you?

It can mean different things to different people. To some, it will mean taking some risky investments and some not so risky investments. If this is all you know about the way your portfolio is set up, move ahead five spaces to the Pennsylvania Railroad and pay the owner $200, because he owns all four. 

If your response is, “I have a combination of different asset classes that are uncorrelated - bonds, stocks, and cash - so when things change in the market, all my investments aren't going in the exact same direction,” then move ahead six spaces, park your racing car on St. James Avenue, and breathe a sigh of relief - you own it.

Third question: Have you been rebalancing your portfolio every quarter so that it is diversified in the same way as you originally set it up to be?

If your response is something like, “What’s rebalancing, the only thing I rebalance is my tires,” move ahead six more spaces and put your token down on Chance and pick up a card. It reads, ‘You are assessed for house repairs: $40 per house and $115 per hotel’. The good news is, you don't have many. The bad news is, it still cost you $240. That means you have $60 left. 

If on the other hand your answer was, “Of course. Every quarter I rebalance my portfolio to its original weightings,” move your car two spaces ahead to Free Parking and pick up all the money in the middle - good job.

Fourth question: Do you regularly review your investments with your advisor to make sure that everything is on track?

If you said, "What advisor?” or, “That isn't part of what we do,” move ahead eight spaces, and place your token on Go to Jail. Take the ride into jail, and wait to do it all over again. 

If you said, “Yes, we meet regularly to review the portfolio and discuss changes that may be appropriate,” move your snappy little car ahead two spaces and land on Chance. Pick up a card and read it out loud, ‘Advance to Go, collect $200’.

And there you have it, a quick primer on portfolio management. For those of you not counting, the wrong answers left you with $60 and three turns in jail. 

The right answers left you the $500 you started with, plus $500 from Free Parking, and an additional $200 for passing Go. All in all, a good turn. 

The key to successfully managing volatile markets isn’t about gut instinct or luck, and it’s not about reacting to whatever’s going on that week. It’s about knowing why you’ve made the decisions you made, creating a plan that guides you through the bad times, and finally, sticking to it, regardless of what your friends are saying.



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