Are seg-funds and annuities outside women's investing radar?

by Leo Almazora19 Feb 2020

With a stronger grip on their financial futures, more Canadian women over 45 years old are feeling financially confident — though they might not be aware of all the options available to them.

According to a recent RBC Insurance survey, seven in 10 Canadian women over the age of 45 are confident that they’ll be able to achieve their desired lifestyle in retirement regardless of their marriage status. Among those who are married or living with a partner, 84% reported having a strong grasp of their and their spouse’s financial needs in retirement, and just over a third (34%) said their significant other is responsible for their retirement savings.

“Women seem to be playing a more active role in managing their finances and understanding their retirement needs, leading to them feeling more prepared and in charge of their financial future,” Selene Soo, Director, Wealth Insurance at RBC Insurance, said in a statement.

While 90% of women in the 45-and-above age group are taking action to prepare for retirement, they may need to catch up in some areas. Sixty per cent of that group said they put money in an RSP or TFSA, but only 14% invest in segregated funds or other products meant to insulate wealth from market volatility, and 8% said they invest in annuities or other guaranteed-income products.

“It’s great that a majority of women are putting money into an RSP or TFSA,” Soo told Life and Health Professional. “But they may not be aware of all the products that are out there. Women who are younger than 45 have quite a long time horizon, but those who are closer to retirement really need to start considering different options that address their needs and goals.”

Those who are nearing the threshold of retirement should be interested in paid annuities, particularly as they require predictable lifetime income regardless of financial markets’ rise or fall; 50% of survey participants cited a lack of guaranteed income as a top concern as they head toward retirement. And as their life expectancies get longer, women need a product to help guarantee that they won’t outlive their income, a fear shared by half of the respondents in the survey.

Those who are younger, meanwhile, may be interested in seg funds for their unique estate-planning benefits. “Seg funds offer growth potential like a mutual fund, but some of its best benefits come from guarantees and protections,” Soo noted. “If markets fall at maturity or death, a seg fund can provide an investor with 100% of the deposit that they originally put in. For small-business owners, there’s creditor protection, which can shield their personal assets from creditors in the event of bankruptcy.”

While annuities and seg funds offer many benefits, they’re not one-size-fits-all solutions. As with all investors, women will have different financial objectives, appetites, and situations, and they will inevitably tread their own paths in accumulation and decumulation. To be aware of their options and create a financial plan, Soo stressed, it’s best for women to work with a financial advisor — something that only 37% of those surveyed said they’re doing.

“In general, women seem to be playing a more active role in managing their day-to-day finances and understanding their retirement needs,” Soo said. “I’m really pleased to see women taking action to prepare financially, and we’re proud to offer products that can help them build a solid financial future.”