By Priti Rathi Gupta
In this century, the average lifespan of an individual has increased by 30 years, making it quite likely for us to touch an age of 100 thanks to better lifestyles and medical advancements. What does retirement mean then? Possibly, more sabbaticals along the way, and definitely more spend on health care in the latter years of our life. It is important to rejig and restructure our financial planning given the above facts. Even more so for women, where the average life span is 4-5 years more than that of men, while earnings are lower than the male counterpart. Retirement at some point is almost inevitable! As a senior citizen, your expenses will continue but income will stop, so you’ll need a good financial cushion to sustain you through your dream retirement.
Here is how you can build a substantial retirement corpus for yourself, depending upon your age:
Planning with 35-40 years to retirement
Starting young provides the advantage of a head start and experimentation with different kinds of products. Any wrong decisions made now can be rectified with ample time in hand before retirement. The power of compounding can show wonders beginning at this stage. Equities and Mutual fund investments among Market-linked returns help to multiply corpus over time. Especially in beating inflation. To inculcate a saving habit, you can start by taking out SIP. Remember to diversify your investments across different products to benefit from different risk and return profiles.
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Planning with 25-30 years to retirement
It is still not too late to start planning for your retirement, with about 30 years still at hand to generate a sufficient corpus. The risk appetite might be lesser than that in your 20s, it is crucial to have an emergency fund, with at least three months’ worth of expenses, and allocate about 30 per cent of your savings towards a retirement fund.
Planning with <20 years to retirement
At a time to make crucial financial decisions, it is always better to start late than never. With considerably lesser time to plan for retirement, begin by shaving off unnecessary expenses and ensure you allocate at least 50 per cent of your savings for retirement (more if you can manage). At this stage, it is important to evaluate your assets and see how they might fit into your retirement plans.
It is never too early or too late for you to begin planning for your retirement. What is necessary is taking that first step. Here is a list of some important ways in which you can create your retirement plan:
- Increase your investments based on your income: It is important from the earlier phases in life, to choose an investment that yields dividends as and when required. Along with your career graph, as and when there is an increase in earnings, you are bound to reach a stage when the volume of investment can be increased.
- Begin early: It is important that you start early, start small and start investing in assets that leverage the power of compounding like Equity Mutual Funds. Younger the person is at the time of commencement of relegating funds towards a retirement investment, the higher is the term build up and the resulting pay-out at the time of investment maturity.
- Relegating a fixed amount for retirement corpus: Investing a fixed percentage of your income towards the main retirement corpus always helps. It is key to keep this corpus aside untouched before retirement.
- Keeping cognizant of inflation: Inflation affects financial planning heavily. While planning, you must always keep in mind all factors that can affect your returns. Inflation can make your returns take a plunge and therefore, while choosing any plan, you must make sure that you have taken the futuristic price-rise projections into your consideration.
- Buy health insurance: Always ensure you and your family are protected with adequate insurance. Uncertainties don’t knock at the door, they are sudden and rather disruptive- emotionally and financially. Our study stated that 58% of women have no health or life insurance in their name. So cover yourself and your loved ones with health and life insurance to ensure the financial stability of your family at any stage in life.
Highlighting the big gap when it comes to women and retirement planning is of utmost importance if we want to stop women from heading towards a poor retirement. A survey by LXME and AxisMyIndia shows only 2 out of every 100 women are actively making a financial plan for their retirement!!
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Women today are excelling in all fields of life and becoming increasingly independent, yet their financial planning continues to take a backseat and is primarily handled by the men of the family. Our study on women and their money power revealed that overall 51% of women in the country are either not investing at all or are unaware of their investments. This brings to light the need for educating women about the importance of financial planning.
However, managing money in the midst of other priorities is easier said than done. Multiple obstacles exist for women of all ages and backgrounds pressurising them to earn enough, access education, care for a family and plan retirement.
Women have differentiated financial needs; differentiated earning potential, career peaks, career breaks, longer life expectancy, and a different approach & mindset toward financial planning. It is thus imperative for women to take charge of their money through smart planning and investing best suited for their needs. Consider options for funding your retirement and securing your financial future. Talk to a financial advisor about your current situation and stay informed about all options available to stay financially healthy at every stage of your life.
(The writer is the founder and MD of LXME – India’s first neobank for women.)
{Views expressed above are those of the author and not necessarily of financialexpress.com. Please consult your financial adviser before making any investment decision)
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