independentPlanning ahead for a future of financial independence can be daunting, by starting early, you can avoid costly mistakes that could put your goals in jeopardy.

By: TINA DI VITO, Head BMO Retirement Institute, BMO Financial Group


Financial planning is important for everyone but women have unique challenges that make planning even more important. And planning ahead, especially for young women, can be a daunting task and an intangible concept. For instance, while retirement is typically presented as a “couple” experience — a stage of life that men and women share with their partners, most in their early 20s do not realize that retirement is very often lived alone, whether by choice, or as the result of divorce or the death of a spouse or partner. In 2001, more than 1,500,000 women in Canada were living alone, more than double the total in 1971.

Not only are women more likely to navigate retirement alone, but they also tend to have accumulated a smaller retirement nest egg. This is because women continue to earn less than men during their working years. Fortunately, the situation is improving, and women have been closing the gap over the past 10 years. However, women are still more likely to interrupt or alter their employment to accommodate their role as the family caregiver. This usually means decreased work hours, more leaves of absence and they are more likely to quit their jobs altogether or have part-time jobs, which often have limited benefits, including health and pension benefits.

REGARDLESS WHAT LIFE-STAGE YOU ARE IN, STARTING YOUR CAREER OR BUILDING YOUR BUSINESS, THESE FIVE SIMPLE STRATEGIES CAN HELP YOU BECOME FINANCIALLY INDEPENDENT:

1. Start early – with an intermittent work pattern, it’s best to start saving as early as you can. There is very little that can beat a regular savings program when it comes to growing your savings/investments.

2. Invest with purpose – match your investments to your goals. For instance, invest longer term (where you may be able to take greater risk) for goals such as retirement, invest shorter term (where you need guarantees or minimal volatility) for goals such as purchasing a new car. Thinking in terms of saving for specific goals rather than investment styles may help you stick to your financial plan.

3. Understand how investments are expected to perform. Is your principal or return guaranteed or does it fluctuate? Will the return be considered interest income, which is taxed as ordinary income, or is it dividends or capital gains which attract a lower tax rate?

4. Take advantage of employer savings programs. Join your employer pension plan or stock purchase plan as soon as you are able to especially if your company matches your contributions. Even if you change employer before you vest (become entitled to your employer’s contributions), you will still be entitled to the portion that represents your contributions.

5. Never ignore tax-free investment returns with a Tax Free Savings Account (TFSA). If you invested $200 of monthly savings for 30 years at a 5% rate of return into a TSFA, you would have around $167,000. But if those same funds were directed to an ordinary investment account instead of a TFSA, you would have accumulated only $110,000 (assuming a 33% tax rate on annual growth).

For developing female leaders, having a financial plan and working with an Investment Advisor is key to avoiding costly mistakes and staying on track to achieving their goals – today and in the future.


Tina Di Vito, is the head of BMO Retirement Institute with BMO Financial Group. A Chartered Accountant, Certified Financial Planner, Trust and Estate Practioner and Certified Professional Consultant on Aging, Di Vito is also a regular contributor of personal financial planning and tax planning articles for BMO’s national client newsletters and websites. She is the author of 52 Ways To Wreck Your Retirement…And How To Rescue It.