When Carolina Billings walked away from her marriage 11 years ago at age 40, she went quietly. She was tired of fighting and after 18 years, she wanted the fastest and most amicable solution to her troubled union.
“I just needed to get out,” says Markham, Ont.-based Ms. Billings, author of Awaken your Emotional and Financial Independence and founder of Powerful Women Today. “I did not fight for distribution of assets.” Instead, she asked for a buyout of $250,000 and kept her own registered retirement savings plans.
Although both men’s and women’s finances are damaged by divorce, women like Carolina are often in a more vulnerable position. That’s because they tend to live longer than men, which means they need to save more, and are more likely to have taken time off of work to raise children or look after aging parents, which means their retirement savings or Canada Pension Plan contributions will be lower.
Lastly, women in Canada still earn less than men – 87 cents for every dollar earned by men, according to data from Statistics Canada, which looks at the average hourly rate for all men versus all men in the labour force. A recent Globe analysis of the power gap that exists in Canada found that of the 171 organizations that disclosed full workplace data, men outnumbered women at 84 per cent of them and out-earned women on average 68 per cent of the time.
In addition to earnings gap, planners say divorcing women are often more focused on short-term factors such as maintaining the family home versus retirement assets such as pensions or RRSPs. When the smoke of the divorce clears, they’re left to rebuild their retirement savings from scratch.
The psychological damage of a divorce can cloud good judgment, says Jackie Porter, a Toronto-based certified financial planner. “They have to deal with a lot of emotional upheaval. And there is no thought given to the pension.”
Older women are more likely to have relied on their partner to manage retirement planning, she says. They may lack financial knowledge and have no relationship with the financial adviser their husband used.
Eva Sachs, a Toronto-based certified divorce financial analyst, says many women focus on keeping the home, regardless of the cost. “Keeping the family home tends to be fairly common and they trade it off against other assets,” she says.
Covering mortgage payments, taxes, insurance and maintenance costs on one income can leave the newly divorced woman with little money left over for retirement savings. Relying on a plan to sell the home at a later date and use those funds for retirement is also tricky, says Ms. Sachs. “If you’re holding onto that home as an asset, something has to happen to it to turn it into income in retirement.”
Kurt Rosentreter, senior financial adviser with Manulife Securities, says that pension discussions are critical during divorce negotiations. In the case where the other spouse has a defined benefit plan, not getting a fair piece of that is a mistake.
If there is a period of spousal support right after the divorce, Mr. Rosentreter suggests investing as much of that money as possible for retirement.
Likewise, recent divorcées should also look at whatever assets they received, whether that’s a home or investments, to see what portion they can redirect into retirement funds, says Annie Kvick, a certified financial planner with Money Coaches Canada in North Vancouver.
“If you receive assets in lieu, you have to work with those assets to create the [retirement] income you need,” she says. That might mean selling a home or liquidating investments.
Anyone who has recently split from a partner and is struggling to get a grasp on their finances needs to rethink their lifestyle. That may require curbing their pre-divorce spending, downsizing or taking overtime. Mr. Rosentreter says the cost of maintaining a household as a single person can be challenging, especially for a woman with primary custody of children who is unable to get a full-time job.
If a woman has the higher salary, there’s more potential for rebuilding retirement assets, says Mr. Rosentreter. He says that after spousal support payments and child support payments, “she gets her life back after seven years.” At that point, he suggests saving aggressively in a retirement vehicle to make up for lost ground.
Another option for a woman coming out of a divorce is to push back her retirement date, says Ms. Sachs. “More and more people are going into the second phases of their career at retirement – whether that’s a part-time business or a consulting practice.”
Regardless of their situation, women should meet with a financial adviser as soon as they know they are going to get divorced, says Ms. Sachs. An adviser can help quantify how to allocate your money and provide strategies for investing. He or she can also advise what to ask for in divorce proceedings.
Best of all, the adviser can be the voice of reason in an emotional time, says Ms. Kvick. “They can save you a lot of money long-term.”
“It’s hard, especially if women have been in relationships where their spouses managed their finances,” she says. But the closer a woman is to retirement “the more retirement should be a big part of their financial discussions.”
In the years that followed her divorce, Ms. Billings rebuilt her finances. Relying on her significant salary as a former chief human resources officer and chief financial officer, she renovated a number of townhouses, upgrading each time she bought and sold one.
She also adjusted her lifestyle and topped up her RRSPs. Her asset portfolio is now worth “over seven figures.”
“I don’t prescribe to any woman to do what I did,” Ms. Billings says. Her advice? “Do what you have to do. And go after what you want.”
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