The gender gap has often left many women wondering how they must plan for their retirement. Another concern that bothers them is how much they must save for their retirement. Though there is no specific formula to calculate the corpus with which a woman must retire, many financial experts reiterate that women must aim for a retirement corpus that is at least 12 times their pre-retirement salary.
With so many factors affecting retirement planning, it is difficult to reach the ideal corpus amount. A lot depends on one’s lifestyle and attitude towards money while other factors like the consistency of earnings and savings, the choice of investments made, and the frequency with which one invests help decide the availability of money to enjoy life post-retirement.
Most married women leave financial planning to their husbands, which means that they pay no attention to their retirement planning. Their single counterparts are mostly not aware of why they must accord utmost importance to their retirement planning. It is unfortunate that many women either ignore or delay their planning for retirement. This can be either due to ignorance or lack of motivation from family and friends. All it takes is a little bit of knowledge of how to manage money and proper discipline to ensure that money matters fall into place. Some essential tips of retirement planning include:
- Start early: Women must start planning for their retirement the day on which they first start earning. That retirement planning is the most significant leg of financial planning is a fact that they must learn early in life. Start by identifying various retirement options. These must include a healthy mix of equities, hybrid instruments, gold, exchange-traded funds, pension funds, and a debt component consisting of fixed-income plans and other money market instruments. Though a lot depends on the risk profile and aptitude to take risks, there must be a concerted effort to include such investment options that earn returns and beat inflation in the long run. Investing in high-risk, high-reward retirement tools expedite the wealth creation process, thereby, encouraging women to retire early and focus on their hobbies and passion. Since many women are prone to taking career breaks due to marriage and childbirth, it makes sense for them to start planning their retirement early in their lives.
- Understand how finance works: The biggest drawback of savings and investments is a lack of understanding of the compounding effect and how it helps to grow money in the long run. It is important that women first learn about the numerous investment options available, and then choose their retirement strategies based on their financial goals. Consider the goals and risk appetite before zeroing in on the retirement strategy that suits best. Women must discuss investment strategies with friends and peers to learn how they invest and then park their earnings accordingly.
- Have a long-term outlook: Retirement is far away, which means that women have ample time to stay invested. Instead of planning just four to five years before retirement, it always helps to start investing early and stay invested for a prolonged period. Financial planning is not limited to depositing a fixed sum every month or year. Rather, it is the identification of the right set of investment instruments and then continuing to invest in them for long period. As the saying goes, “Don’t put all your eggs in one basket.” This means that women must opt for varied investment options and then continue to put their money in them consistently for an extended tenure.
- Invest smartly: Success is not hard to achieve when one knows how to go about it. To grow money and see it turning into a heavy corpus, women must invest smartly. Identify which instruments help earn quick returns at low risks or the fixed instruments that yield moderate returns over the period. With so many money market instruments like mutual fund units, stocks and shares, unit-linked investment plans, endowment policies, health insurance, and life annuity decisions that allow one to invest and stay insured. Apart from helping to create wealth, some plans also extend protection to loved ones.
Why must women save more?
As opposed to the men in their families, women must try to save more. This may seem difficult owing to the gender pay gap that causes many women to earn less. However, the responsibilities that women bear at different stages of their lives mandate them to start planning their investments much earlier than men. Apart from the individual dreams that many pursue, many women are the financial backbones of their families. Also, they have to equally contribute to the education and marriage of their children. This means that the money they earn must be saved and invested to take care of both their personal and familial responsibilities.
Also, the money that they save for their post-retirement phase serves as a safety net for their loved ones who may have either exhausted their savings or are dependent on them owing to health concerns. The life expectancy of women is also higher, which means that most live longer than their husbands, thus, requiring them to save an adequate corpus to look after their growing needs.