Priorities for women, both personal and professional, change after marriage. They always put spouse and children ahead of their own goals. In due process, women ignore a lot of their own personal objectives, including their health. This is also true for retirement planning. They lag far behind compared to their spouses when it comes to financially planning for their golden years. This lackadaisical attitude stems from the fact that they are not truly involved in managing their personal finances. While women are active in managing the household budget, other important financial matters relating to insurance, investments, banking, etc., are being left to the spouse. Women hardly think about their retirement. They equate retirement savings with just Employee Provident Fund and Public Provident Fund money, assuming it would be enough. One more dangerous assumption harboured by women is that their spouses retirement fund will be enough for both partners.
With this lax mindset, women do not give a serious thought to retirement. They do not realise that the retirement challenges like maintaining the standard of living with limited income, rising inflation, mounting healthcare costs in old age, etc., are as much the same for them as for men. In fact, these challenges are acute for women & it becomes all the more important for them to take retirement planning seriously.
Here are the reasons:
High life expectancy: Generally, women have a higher life expectancy, i.e., they outlive men by a significant number of years. Longer life span means a woman would thus need additional money to manage her living expenses. Higher life expectancy would also imply a greater requirement for money to take care of medical emergencies in old age. A woman would thus need to make her retirement savings last much longer.
Possibility of low career span: A woman after attaining motherhood usually faces some stumbling blocks in her career path. Lack of support system often forces a woman to take a long sabbatical only to end up in a low paying job or be a stay-home mom forever. This implies low savings & consequently a low retirement fund for a woman as her potential earnings become restricted or her professional career is being cut short due to family commitments.
Dependency: Women may face financial issues in old age, especially in the event of spouses death and if the latter savings are not sufficient. In such a scenario, she may be compelled to look towards her grown up children for her sustenance even though she would prefer to stay financially independent. Money issues with children or incompatibility while staying under one roof with them can make her further financially insecure. To avoid such situations, a woman would require higher personal savings for her independent survival.
Getting started:
A woman first needs to estimate how much she would need to retire to maintain her current standard of living. Then she needs to ascertain how much she has already saved and how much she needs to invest to bridge the gap. This math should be done independent of the spouses calculation of the retirement corpus assuming that she would shoulder the entire responsibility of the household expenses in retirement. Although this would probably not be the case in the future and a portion of the household expenses can be discounted, it is always prudent to estimate expenses on the higher side. A situation of substantial buffer is always better than shortfall in the golden years.
The right approach to investing for Retirement
Being a breadwinner is not enough. A woman should have the requisite financial know-how to manage her money and not leave it to her spouse, father, brother, etc. It will help her to make informed investment decisions and generate better returns on investments.
To build a sizeable corpus, investing in just fixed income options is not adequate. Also, women should know the difference between buying gold and investing in gold by clearly defining her objectives. If she is investing in gold, it should ideally be not more than 10 per cent of her total portfolio. Allocating a major portion of her savings in equity mutual funds early on will help her to build a good retirement corpus.
To conclude, life is uncertain and a woman should always be financially prepared for her twilight years. Death of spouse, money issues with children, can make a woman dependant and financially insecure during old age. In such situations, having own retirement corpus will enable her to live life on her own terms with pride and dignity.