RETIREMENT PLANNING FOR WOMEN

 

RETIREMENT PLANNING FOR WOMEN

Save diligently to counter the impact of career breaks

 

On this International Women’s Day, let us first delve into why women’s retirement planning must differ from men’s. We will then examine strategies that can help you achieve this vital financial milestone. 

Key challenges

Women have a longer life span than men. Data indicates the average life expectancy at birth for both genders is 72 years in India It is 73.6 years for women and 70.5 year for men. Thus, women, on average, can expect to live for three years longer. For working women from well-to-do backgrounds, the life expectancy is likely to be even higher. Thus, women need to save more to cater to a longer lifespan.

Women, however, tend to experience disruptions in their careers. In their late 20s or early 30s, they might need to take a break or two to have children and raise them. This hampers their career prospects, earnings, and saving potential.

Even when they return to work, they find it difficult to devote time beyond the regular office hours due to their familial responsibilities. This hurts their prospects in competitive environments.

Inherited wealth is the most significant source of wealth creation globally. When someone inherits assets from parents in their mid-20s or 30s, it elevates them to a higher financial status. But in many parts of the country, women face unequal inheritance rights.

 

Start early

Women must begin to save from the day they start working to reap the benefit of compounding. Imagine you are aiming for a Rs 10 crore corpus by age 60. Let us assume a 12 per cent annual rate of return. If you start at 25, you would require a monthly investment of Rs 15000. If you delay the start to age 30 the monthly contribution increases to Rs 28000. And if you wait until 40, the saving required skyrockets to Rs 1 lakh per month. Women should Endeavour to save at least 15-20 per cent of their income for retirement.

 

Prepare for career breaks

Save money for career breaks. Being financially prepared will enable you to choose a better and more significant role on return. If you are financially desperate, you may settle for the first available option, which will affect your future earning and saving potential.

 

 

 

Setting up the retirement portfolio

For this long-terms objective, investing in equities is a must, as they alone have the ability to outpace inflation. Being overly risk-averse can hurt you.

If you earn a 12 per cent return form equities, your money will double in six years. If you invest in a fixed deposit that gives a post-tax return of 5 per cent, your money will double in approximately 14 years. Over a 35-year career span, the difference in final corpus will be massive.

Build an asset-allocated portfolio with a healthy mix of equity, debt, and gold using mutual funds.

To decide your equity allocation, use the 100 minus age thumb rule as a starting point, then modify it further by taking into account your life stage and risk tolerance.

Rebalance the portfolio once annually. Retirement plans (like Employees Provident Fund) where the employer makes a matching contribution.

Having your own health insurance cover is vital so that a large expenditure caused by a critical ailment does not derail your retirement saving journey.

Maintain an emergency corpus equivalent to 6-12 months of expenses to avoid touching your retirement corpus in case of a sudden need.

 

Mistakes to avoid   

If you leave investing for retirement until too late, it could prove to be a critical mistake. Overspending on children’s education and consumption needs can also hurt. Relying on gold alone to achieve retirement security is another fatal error.

Finally, take charge of your personal finances.

Delegating the responsibility of investing to male counterparts, like a father or a husband, often proves costly in case of death or divorce.

 

TERM PLAN

Critical for single women with dependents

• Single women who earn and have dependent children or elderly parents must buy adequate term cover
• Buy personal cover instead of relying on the group cover offered by the employer
• Decide the sum assured based on earning potential over a lifetime, or by taking into account the family’s current and future expenses and goals
• Buy cover early to lock in a lower premium rate
• Select an insurer with a claim settlement ratio of over 95 per cent
• Avoid insurance-cum-investment plans : The insurance cover is usually insufficient and the returns are low

 

For More Details: Pooja Manoj Gupta, visit www.giia26.com
Email: pmgiia26.com Mobile  9868944340