Retirement In Canada: Women Financially Vulnerable To Widowhood & Divorce

Divorces and the death of loved ones are not easy events to go through, but according to a Statistics Canada study, the financial impact isn't equal for both partners. As it turns out, the later a woman is divorced or becomes widowed, the harder the impact to their finances compared to men or to their female counterparts who remain married.

The results of the study are a little shocking at a first glance: among men, divorce and separation had little effect on their income maintenance in old age. Widowhood even increased economic resources for some.

Women, however, suffered strikingly different results, with those from higher-income families reportedly feeling the impact most: those with the most family income at age 54-56, maintained 74 per cent of their income in retirement at ages of 78 to 80 if they stayed married. For widows, family income fell to 65 per cent. For divorcees, it fell to 53 per cent.

The later a marriage suffers a divorce the greater the impact on a woman's finances

Median income women reported similar results. Those still married maintained 83 per cent of their family income in old age. For those widowed after age 55, the number drops to 79 per cent, while those who divorced or became separated saw their income drop to 73 per cent of what it was when they were between 54 and 56 years old.

"When you take assets and divide them in half, it really does have an impact," says Cynthia Kett, chartered accountant, certified general accountant, certified financial planner and principal of Stewart & Kett Financial Advisors, Inc. "It costs more for two individuals to live than it does for one couple. By the time a divorced person realizes what's happening too, there is usually a limited amount of time to get things back on track."

One of the biggest hurdles for divorcees, Kett says, is basic knowledge about their personal financial situation – in a lot of relationships, usually one spouse or the other takes a more active role in managing the family's assets. "One of the biggest hurdles is to get knowledge about their personal finances if they don't understand them already."



As for the divide between older men and women, and their ability to rebound from a division of family assets, she points out that a lot of older men are better able to continue earning income.

Similarly, though it is less common today, some older women still don't have the same degree of confidence in their ability to make financial decisions either, according to Kett. "It's really important to separate the emotional reaction to the event from the financial reality and to realize if they don't understand how to deal with their financial assets and how to managed their new financial situation, they need to go and get some professional help."

The only exception to the trend observed in the study occurred for women already in the lowest income group (likely those with few assets to begin with), as Old Age Security (OAS) payments and Canada Pension Plan (CPP) payments generally boosted their cash flow somewhat.

However, researchers say trends like this might not remain in place for younger generations of women in the future. Typically, younger women have participated in the workforce more, and if needed, have more opportunities to work after divorce or widowhood to rebuild their now-divided savings.

Still, in studying a younger cohort of women, the numbers not only remained in place, but actually deteriorated: income replacement rates for divorced, median-income women in their 50s in 1993 were 10 per cent lower compared to the still-married group from the 1983 cohort, and 15 per cent lower relative to those still married in the 1993 cohort.

Kate McCaffery is a freelance writer, editor and former urbanite, now living somewhere in between the lake, the ski hill and some farmer's cow path. mccaffery.ca/kate2.0/ for more information.

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