Investment Ideas For Women Over 40

For many women, your forties are a time when your salary spikes and time off work for events such as maternity leave or changing careers comes to an end. As your money-matters shift, you may be looking for the optimum investment ideas for women over 40.

Your volatile 20’s and 30’s have come to a close but you still have a good 15 to 25 years to save for retirement. Hopefully, you started saving money years ago, even if you were living off a smaller salary. If not, don’t fret, you can catch-up.

Most people reach their peak income in their 40’s, however the desire to attain the best “stuff” can lead to peak overspending at this age. Big houses, fancy cars, and cool stuff for our kids can derail many women’s investment goals.

It makes sense that with this new decade, come new investment strategies. Even if you are just getting into saving and investing money, there is time to grow yourself a healthy nest egg.

Think of your 40’s as the time to ramp up your savings efforts. Debt should be going down, and savings up.

In this article you will learn why it is very important that women invest money for their futures….we have more hurdles to overcome than men! But, be assured, women are well-equipped to navigate the world of investments. In fact, we are better at it!

You will read about some great investment ideas for women over 40, whether you have been saving for years or are just getting started.

why women should invest money

High Price Items are Ahead – Although salaries may be increasing and your debt is on the decline, there are still big ticket items and events on the horizon. Saving for your children’s post-secondary education, paying down your mortgage, and putting money aside for your kid’s wedding are all expenses you might face.

Divorce – Sometimes our best laid plans get sidelined! According to The Vanier Institute of the Family, an estimated 41% of marriages in Canada will end by 30 years of marriage. In fact, 13.7 years was the average length of a marriage in Canada (2008). Separation and divorce costs money. You may have to purchase a new home and split your existing savings with your former partner…setting you back years.

The Wage Gap – In many industries women still earn less than their male counterparts. A recent survey of Canadian women by BDO Canada Ltd, found that women suffer more financial challenges than men.

• Thirty-five percent of women surveyed said a lack of income is raising their personal debt, compare with 28% of men.
• Three quarters of women struggle to save for big purchases, versus 70% of men.
• Forty-three percent of women said they have no retirement savings.

women make better investors

According to an U.S. study by Fidelity Investments, only 9% of American woman believe they are better investors than men. Yet, an analysis of more than 8 million of its clients showed that women “tend to outperform men when it comes to generating a return on their investments.”

Here are the two main reasons why women were found to be better investors than men:

Women Earn Higher Returns on Their Investments	According to the study, women perform better than men by earning about 0.4% more on their investments. Over time, this adds up to a lot more money
Women Save More Money	In Fidelity’s analysis, women contributed more to their workplace retirement accounts. They saved a yearly average of 9% of their paycheck – compared to 8.6% for men. The same holds true for other investment accounts. Women saved an average of 12.4% of their total account balance in a year, compared to 11.6% for men.

What are the impacts for woman over 40 earning higher savings rates and rates of return?

Impact of higher savings rates and rates of investment returns: women versus men

	Savings Rate and Rate of Return	Potential Balance at age 67	Difference	Difference as a Percentage
Women Starting to invest at – Age: 40 Salary: $100,000	Saving 9% of their salary per year 6.4% rate of return per year	Approx. $1 million	$93,334 more than men	About 10.6% more than men
Men Starting to invest at – Age: 40 Salary: $100,000	Saving 8.6% of salary per year 6.0% rate of return per year	Approx. $900,000	$93,334 less	About 10.6% less

The number of women who control the family finances is huge. Being better savers is a great start, however saving money alone isn’t enough.

Interests rates on savings accounts don’t keep up with the rate of inflation so you are essentially losing money by having your money sit in a traditional savings account.

You need to invest properly and have your money grow so you can achieve your financial goals, like retiring rich.

You can do it! All it takes is some financial education and the will to start and stick to it.

In fact, you are already hardwired to be a successful investor.

character traits of successful investors

Planning and Thinking Long-term – Women plan their investments based upon long-range life goals for themselves and their families, and not just on immediate profit. They tend to invest more conservatively in the stock market and hold on to their stocks and bonds during market fluctuations.

Don’t Take on Too Much Risk– Women are more likely than men to have their investments in the right place for their age. For example, women 40+ invest less of their retirement savings in equities, which are riskier. Also, women’s investment portfolios are more diversified and can withstand market downturns better.

Patience – According to the Fidelity study, men are 35% more likely to make stock trades then women. Their data revealed that men, who bought and sold stocks in 2016, made 55% more trades than women investors in the same year. Practicing patience during market volatility is an important trait towards long-term gains.

Desire for Knowledge – Although women might underestimate their abilities to invest, they are eager to learn. Many believe they didn’t receive enough financial education in school, with “learning how to invest money” being the topic most want to learn more about.

women investors are on the rise

The number of savvy women saving and investing their own, and their families, finances is on the rise.

In a survey by Canadian magazine, Chatelaine, of 1000 women:

• 53% said they were on top of their money.
• 87% of women who borrowed money from their families paid it back
• 51% think they are better with money than their partners.

A concern some women have is that they don’t earn enough money to invest.

Read our Investment Ideas for Low and Middle Income Earners.

No matter what your income or starting point, there is an investment idea for every gal. Here are some of the best investment ideas for women over 40 years old.

investment Ideas for women over 40:

1. invest in your pension

At forty, you still have lots of time to contribute to a pension if your employer offers one. Workplace investment plans make saving money each month easy.

Typically your contribution will be deducted from each paycheck and your employer will contribute some money too.

Since your earnings are higher in your 40’s, your employer will be ponying up more cash on your behalf.

buying back your pension after maternity/parental leave

If you took time off for maternity and parental leave, consider buying back that time if you haven’t already. The amount this will cost depends on the duration of time you were on leave when you didn’t contribute to your pension.

For example, during my current maternity/parental leave, my employment insurance (EI) benefits were topped-up by my employer for 13 weeks. The remainder of my leave was time I didn’t contribute to my pension plan. If I want to “buy-back” that time it is going to cost me around $4,600.

That is a lot of money, especially coming off a stretch living off of EI. However, you should have the option of buying it back through small salary deductions over time.

2. RRSP versus TFSA

With or without a pension, it is vital that you are saving money in a retirement savings account. You want your savings to be invested in an account that is marked for long-term savings but is still accessible in an emergency.

Two good options are to contribute to a registered retirement savings plan (RRSP) or a tax free savings account (TFSA). Both investment vehicles have their advantages depending on your individual circumstances.

Important Investing Tip – Set up automatic deductions from your paycheck or bank account on the day you get paid. Have a set amount of money transferred directly into your savings and investment accounts.

Registered Retirement Savings Plan

RRSPs were introduced by the Government of Canada as a tool for Canadians to save for retirement. The money you contribute into an RRSP can be held in several accounts.

Some of which are:

• savings account
• mutual funds
• stocks and bonds
• exchange traded funds
• guaranteed investment certificates (GIC’s)

The benefits of a RRSP are that the money you contribute in a year reduces the amount of income tax you need to pay that tax year.

An RRSP is a tax-deferred account meaning that you contribute to it with pre-taxed money. You will be taxed on that money when you make withdrawals in the future.

The rules around when you can withdraw money are also stricter.

To read more about registered retirement savings plans, try a Handful of Thoughts article, A Complete Guide to Your RRSP.

tax free savings account

The tax free savings account is another legitimate tax savings option for long-term savings because the total contribution limit has reached $69,500.

The money you invest is after-tax income, meaning you’ve already paid income tax on it.

Any investment gains made in your TFSA are not subject to taxation…ever. Even upon withdrawal. If your portfolio grows well within a TFSA…that could be a lot of tax free money.

Where the TFSA beats the RRSP is that the money in your RRSP will be subject to tax upon withdrawal. However, you will probably be retired and therefore in a lower income bracket and hit with less tax.

Read here for an in-depth comparison between the RRSP and TFSA.

A general guideline is if you are young and your income is low, contribute to a TFSA first. For us 40-somethings, we will get more benefit by contributing to an RRSP when our income is higher and we reach a higher tax bracket.

3. revisit your investment plan

Now that you are inching up ever so slowly on your retirement years, women over forty should think about how much money they will need to live off of.

If you already have a financial plan, great! Now is the time to adjust it to make certain you are on track to save enough money. Pay close attention to what fees you are paying on your investments.

If you haven’t started saving for retirement yet, you aren’t alone.

According to a poll by accounting firm BDO Canada Ltd (2019), a third of Canadians have no retirement savings.

Thirty-eight percent of Gen X’ers (36 to 51 years-old) have no retirement savings.

Don’t worry, there is still time. You have a couple decades to reach your savings goals. Just make sure to be smart with your disposable income and diversify your investment portfolio.

match your risk tolerance to your stage in life

The closer you get to retirement age, the less money you want invested in riskier assets like stocks.

Investors in their 40’s and 50’s might want a more balanced portfolio that will capture market growth but also protects against market volatility.

Here is an example of how a portfolio might look based upon two different investor profiles:

Investor Profile	Portfolio Allocation
Conservative Investor in their 40’s	60% stocks 40% bonds
Aggressive Investor in their 40’s	70% to 80% stocks 30% to 20% bonds

Your comfort level for risk is entirely personal and the decision is up to you. You will be asked questions about your risk tolerance when you set up an investment account.

find an investment option with low fees and minimums

As you very gracefully grow older, it is important that none of the money you invest goes to waste. An easy way to do this is to invest using a discount brokerage or a robo advisor.

Look for a brokerage or robo advisor that has a low minimum investment amount…ideally $0.

Both options allow you to hold your money in account types such as RRSPs, RESPs, TFSAs and more.

online Brokerage

An online or discount brokerage lets you buy and sell stocks online using your trading account. This method of investing in the stock market yourself reduces the cost of a traditional brokerage.

You can build your portfolio using low-cost Exchange Traded Funds (ETFs) however there is a higher risk involved because you need to do some research as to which funds you want to buy.

Read more about the Best Online Brokerages in Canada.

robo advisor

Another good investment idea for women over 40 is to use a robo advisor.

A robo advisor uses a combination of a computer algorithm and human advisor to create an investment portfolio for you.

You will fill out a questionnaire about your risk tolerance and a robo advisor will invest your money into exchange traded funds (ETFs).

Read our step-by-step instructions, Simple Steps for Investing With a Robo Advisor.

The management fees are slightly higher than with an online brokerage but are still far less than using a financial advisor.

Click here for a detailed comparison of the Top Canadian Robo Advisors.

To narrow down your options, look closely at the investment fees you’ll need to pay:

Inactivity Fee – some brokerages require you to make a certain amount of trades a year to avoid a fee. Trade requirements could be as little as only once or twice or year.

Account Transfer Fee – this is the amount that you will be charged by your bank to move your money into a new brokerage or robo advisor account. Many online firms and robo advisors will reimburse you.

Management Expense Ratios – these are fees you’ll pay to cover the costs of managing your investment account. They are expressed as a percentage. You’ll pay anywhere from 0.10% with a discount brokerage to 0.75% with a robo advisor.

How much Money do you need to retire?

To find out how much money you’ll need to retire comfortably, read The Canadian Budget Binder’s article, How to Estimate and Plan Your Canadian Retirement Budget.

If you are Canadian, keep in mind you have future government benefits like the Canadian Pension Plan and Old Age Security.

4. buy the house and car you can afford

As a general rule, you should spend no more than 30% of your monthly gross income on housing. For renters, that includes utilities. If you own a home, that number includes the interest on your mortgage, property taxes, and maintenance.

Purchasing a big house is tempting, especially if you have a family and want each child to have their own room. But, you’ll have a difficult time reaching your retirement goals if you are bogged down with expensive mortgage payments.

The same holds true when purchasing a car. Unlike a house which can appreciate in value and be considered an investment, a car is worth less the more you drive it.

If you have the extra money after putting aside your savings goals each month, than go ahead a buy a fancy car. But, if you can’t contribute the necessary amount each month into your RRSP, buy the care the simply meets your needs.

5. investment ideas for women over 40 – final tip

make a budget

Your 40’s is a time when your salary and expenses are shifting.

It is a great time to make a budget and take stock of exactly what income is coming in and how your expenses have changed since your 30’s.

Without a budget, many of us are left at the end of the month wondering where our money went.

Creating a budget based upon your income and keeping track of your expenses allows you to determine what extra money is left for saving and investing.

An important step when making a budget is to make a list of goals. Determine what you are saving for and how much money can you set aside each month to reach those goals.

Goals keep you motivated!

For a step-by-step guide on how to make a budget, read our How to Make A Budget post.

Use our free, printable budget planner and expense tracking worksheets to help you out. Sign up below and The Budget Planning Bundle will immediately arrive in your inbox – ready to download. It is simple to use and helps you to include all the expenses you might otherwise forget. We don’t spam!

We hope you found these investment ideas for women over 40 helpful. Get started on your money goals now and happy investing!

Related Articles:

Investment Ideas for Low and Middle Income Earners

Top Canadian Robo Advisors

Simple Steps for Investing With a Robo Advisor

Top Tax Return Software for Canadians