There’s a TFSA wealth gap in Canada that demands some attention.
While men continue to make higher wages than women and have more wealth overall, women are getting better results from tax-free savings accounts. They’re contributing more money and have more valuable TFSAs.
TFSAs have racked up many wins in personal finance – they give low-income people a way to save for retirement that won’t interfere with eligibility for the Guaranteed Income Supplement, they offer people of all ages a flexible way to save and invest for various life goals and they give seniors a place to park money they must withdraw annually from registered retirement income funds. Helping to counter the wealth gap is another success.
A quick summary of the advantage women have with TFSAs can be found in a total fair market value comparison for 2022: $281.3-billion for women and $237.2-billion for men. These numbers come from the Canada Revenue Agency and apply to 2022, the most recent year for which there is data.
A comparison of the average fair market value per person gives us $30,750 for women and $27,502 for men. The total value of contributions for that year was $49.4-billion for women and $45-billion for men. Women made a total of 77.3 million contributions in total, compared to 68.6 million for men.
Women are getting more benefit from TFSAs overall, but not at every age. For some reason, women between 18 and their mid-30s lag men of a comparable age in total number of contributions. Age 18 is the minimum to open a TFSA.
Young women do outperform in one respect – the average fair market value of their TFSAs consistently beats men between the ages of 18 and 29. From 20 to 24, the average fair market value for women and men is $7,250 and $6,043, respectively. Take that, investing bros.
Starting in their late 30s, women move ahead of men in TFSA contributions. In the 55 to 59 age bracket, 458,120 women and 360,220 men contributed to TFSAs in 2022. A little over 77,500 women contributed the maximum to their TFSAs in that age bracket, compared to 70,680 men.
The longer lifespans of women come into play in the discrepancy between the number of women and men who are TFSA-holders. In the 80 and up age group, there were 765,120 women with TFSAs in 2022 and 541,430 men.
The CRA numbers suggest a different narrative than we find when looking at gender differences in wages and wealth.
A Quebec study released earlier this year found men in the province have almost 30 per cent more average net wealth than women. Statistics Canada has reported that women earned 9.2 per cent less than their male counterparts in 2022, an improvement from 15 per cent in 2007.
TFSAs benefit all, regardless of gender, age or income level because of their practicality. You contribute to TFSAs with after-tax money and from there you have no further dealings with CRA unless you exceed limits on how much money you can add to your account. Both contributions and gains from interest, dividends and capital gains are yours to keep in full.
TFSAs are about financial empowerment, and women clearly get that. But not all the TFSA numbers tell a positive story about women’s finances. While women contribute more money in many cases, they also withdraw more.
In 2022, women withdrew a total $25.9-billion from their accounts and men withdrew an average $23.8-billion. The average number of withdrawals that year was 5.6 for women and 4.9 for men.
The gap on withdrawals between women and men is fairly small, but it speaks to the reality that women drive many household purchasing decisions and often pay more than men for goods and services.
A final word for young women: check out first-home savings accounts, and stay open to registered retirement savings plans as your earning power increases. But keep pouring money into TFSAs as much as you can. They’re a proven way for women to close the wealth gap.
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