Mother’s Day 2023: Retirement planning is essential for everyone, especially for working mothers as they need to maintain a delicate balance between their professional and family responsibilities. This balancing act may often have an adverse impact on a working mother’s ability to save for retirement, particularly when they need to take time off from work to raise their children. That is why, it becomes more important for them to plan for their retirement in advance.

In an e-mail interaction with FE PF Desk, Anup Bansal, Co-founder of Scripbox shares why retirement planning is important for working mothers and how they can do that. Edited excerpts:

Why is retirement planning important for working mothers?

With soaring inflation, the cost of living including healthcare expenses, (which is one of the major cash outflows in old age) is likely to increase at the time of retirement. Without sufficient investments, it can be challenging for working mothers to address these increasing expenses which can lead to stressful outcomes after retirement. To avoid this, working mothers should start saving for their golden days early in their lives. Even if it is a small amount, it matters and can generate compounding returns over the long term.

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How should working mothers approach retirement planning?

Working mothers in India can approach retirement planning by following a systematic and disciplined approach.

i. Assess the current financial situation and determine retirement goals: To effectively plan for retirement, working mothers should begin by assessing their current financial situation and establishing clear retirement goals. This involves carefully considering their assets, liabilities, and sources of income to gain a complete understanding of their cash flow.

Based on that, working mothers can determine their retirement goals, including the lifestyle they wish to maintain and the amount of retirement corpus required to achieve those goals.

The age at which they want to retire also has a significant impact as it helps in deciding the asset allocation ratio. By considering these factors, working mothers can establish a clear picture of their financial needs and ensure that their retirement planning efforts are focused and aligned with their long-term objectives.

ii. Focus on efficient asset allocation: Efficient asset allocation is a vital component of retirement planning for working mothers. To achieve their long-term financial goals, working mothers can distribute their investment funds wisely across various asset classes. It is essential to create a diversified portfolio having both equity and fixed-income instruments to balance out the risk and rewards of both.

This strategy can mitigate risk exposure while maximizing returns, align investments with their unique risk profile, and customize their investment portfolio to meet their specific retirement goals.

iii. Review and Rebalance Portfolio: Regularly reviewing and rebalancing investment portfolios is a crucial part of ensuring long-term financial success. The volatile nature of financial markets, changes in personal circumstances, and the need to maintain efficient asset allocation are the primary reasons to periodically review the portfolio.

As retirement approaches, it’s essential for working mothers to ensure that their investment portfolio remains consistent with their retirement goals and avoids overexposure to any one asset class. This practice allows working mothers to make adjustments to their portfolios, generating more income and preserving capital as they approach retirement.

Regularly reviewing and rebalancing the portfolio is a critical component of this approach, helping to ensure that the investment mix remains aligned with the working mother’s retirement objectives.

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What are the financial products working mothers should consider for retirement planning?

Working mothers should analyse their existing financial condition and keep a long-term approach in mind with a focus on creating a diversified portfolio.

If the approach is passive due to lack of time and/or expertise, it is advisable to invest in ETFs, index funds, Fixed Deposits, PF and Liquid Funds.

If a working mother has active involvement then the approach may be to invest in Equity Mutual Funds, stocks, bonds and debt mutual funds. However, working mothers should be cautious to invest as per their unique investment profile and risk tolerance level and consult an expert if required.

Key points working mothers should keep in mind

  • Working mothers should keep these 5 basic yet impactful points in mind while planning for retirement.
  • Start saving as early as possible to take advantage of compounding returns.
  • Consider the impact of inflation on retirement savings and adjust contributions accordingly.
  • Diversify retirement savings across different investment options to reduce risk.
  • Take advantage of tax benefits offered by retirement products such as the NPS and PPF.
  • Consider working with a financial advisor who can help create a customized retirement plan.

(Disclaimer: Views expressed above are personal opinions of the respective commentators. Please consult your financial advisor for retirement planning)