What should women do to retire rich with high pensions? Experts explain

While retirement planning is becoming the most sought-after goal, there are many women investors looking for the right way to do so

how to retire rich with high pension
Here's what women should do to retire rich with high pensions, according to experts

Retiring rich with a high pension is one of the top financial goals of women investors in India today. With this goal in mind, many women are starting their investment journey early. Recent surveys by various wealth-tech platforms have revealed that more women are making retirement planning their top financial priority.

For instance, an analysis by Kuvera found that retirement planning was the top financial goal of 25% of women investors on the platform, which was followed by home buying (21%) and car buying (14%). Interestingly, there was also a drop in the median age of women investors, indicating that more younger women are now taking control of their finances.

Another survey by MYRE Capital found that retirement planning was the top goal of 60% of over 5200 women respondents. The survey also found that bank Fixed Deposits, Recurring Deposits, PPF, NPS and Mutual Funds were the most preferred asset classes for women.

Also Read: How women salaried employees can increase their tax savings in 2023

While retirement planning is becoming the most sought-after goal, there are many women investors looking for the right way to do so. As we celebrate International Women’s Day 2023 (tomorrow, 8th March), FE PF Desk got in touch with some personal finance experts to understand how women can retire rich with a high pension. Here’s what they say.

Think beyond traditional options

Vishakha Kapoor, AVP, Investments at FinEdge, says that retirement planning is usually a very long-range goal and a very common mistake that women investors make is to let their natural risk-aversion come into play while saving for their retirement.

“Choosing to stick only with traditional, low-return investments such as PF, FDs or Life Insurance policies can have catastrophic consequences on the size of their retirement corpus. To put this in perspective, Rs 20,000 saved per month in a 7% return asset class will grow to around 2.43 Crores in 30 years. The same amount, if compounded at 12% per annum in mutual fund SIPs, could grow to a whopping Rs 7 Crores,” says Kapoor.

Invest in NPS

“If a woman plans to start her retirement plan from a young age, then there is no better option than NPS to retire rich with a high pension, on which she can also avail of Income Tax benefits. Allocate your portion of investment in NPS into equity of up to a max 75%. So far it has delivered a 9-12% annualised return, which not only beats the inflation rate but also offers much higher returns than other traditional tax-saving investments like PPF,” says Kumar Binit, Co-Founder and CEO at FinMapp.

Save for your retirement independently

Kapoor says that salaried women who start out saving for their retirement independently often stop saving for this goal and hand over the reins to their husbands after getting married – sometimes dissolving their own retirement fund altogether and pooling it with their family’s overall finances.

“We would, however, advise them to continue saving for their retirement independently even after tying the knot. While married couples should be completely transparent with each other about their finances, there’s no reason why a three-pronged “yours, mine and ours” strategy shouldn’t work out in the long-term benefit of everyone,” she says.

Consult a trustworthy advisor

Kapoor further says that several behavioural biases such as loss aversion, fear and impatience could easily derail this long journey because the returns will be unpredictable and non-linear.

“The support of a trustworthy advisor who can handhold them through the ups and downs could play a very important role in ensuring that this goal is met,” she adds.

No short cut to get rich fast

Yashika Malhotra, Senior Investment Manager at FinEdge says women should understand that there is no shortcut to getting rich fast. You may end up having severe heartaches with any scheme that is promising to make you rich fast.

“These schemes usually end up causing much heartache to investors. The journey to wealth creation is a slow and painstaking one; and it involves, among other things – a thorough understanding of concepts such as risk/reward and compounding, the ability to go beyond the comfort zone of risk aversion, continuous self-education and the regular monitoring of a goal-based investment plan,” says Malhotra.

Girirajan Murugan, CEO of FundsIndia also says it is not possible to get rich overnight. “Remember that wealth creation involves a long-term commitment to saving, investing, and making wise financial decisions. It is a long-term practice that demands patience and self-control. Practically, it is not possible to get wealthy overnight,” says Murugan.

‘My advice to working women is to focus on making wise financial decisions and being devoted to your goals, and you’ll be well on your way to financial security and possibly even prosperity in no time. Yet, there are a few things that salaried women professionals can do to position themselves for financial success: build a budget, manage debts, and make wise investments,” he adds.

Also Read: Retiring in 40, 35, 30, 25 or less than 20 years? Here’s how women should plan for retirement

Start Early

Experts say that women should make it a point to monitor their key personal financial ratios such as reserve surplus and savings surplus. This will ensure that their goal-based investments are automatically stepped up in sync with their rising incomes. Further, you should start your investment journey as early as possible.

“Salaried women employees should ideally start mapping out their goals within the first year or two of starting out their careers and start off with whatever is comfortable. Well begun really is half done! Regular conversations with a financial advisor who has patience and empathy will gradually help working women build confidence around money matters and even play a pivotal role in their family’s financial plan after they get married,” says Malhotra.

“Starting to invest at the beginning of one’s career gives you the advantage of having time on your side. While the initial capital growth can be slow, it’s the compounding effect after 7-10 years that can quickly help you create a second income stream from your investments,” she adds.

Top takeaways

  • Start investing early
  • Consult trustworthy advisor
  • Don’t fall for get-rich-fast schemes
  • Invest in NPS
  • Invest in Equity
  • Save for retirement independently

(Disclaimer: Views expressed above are those of the respective commentators. Please consult your financial advisor before making any investment decision)

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First published on: 07-03-2023 at 12:47 IST
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