The spending patterns and saving patterns of men and women are different. Yet, though they may choose to save and invest differently, they both will look forward to having financial security in their sunset years. Though the goal is basically same—which is to have financial independence and security—the retirement planning for women and men will be different. In fact retirement planning for women is actually more important than it is for a man.
Retirement planning for women brings unique challenges
Women need to focus more on their retirement planning due to various reasons which we will discuss below. However often women either fail to give it the due importance or leave it to the men (or worse, completely ignore it).
Let us consider two examples of retirement planning for women to get a better perspective about their retirement planning:
EXAMPLE – 1 Mr. and Mrs. Jones are a working couple. Both invest in tax saving schemes and both get the PF deduction from their salary. This means each one has his/her own savings kitty and retirement funds in their own name.
EXAMPLE – 2 Mr. Smith is the only earning member of his family. Mrs. Smith is a homemaker. She has a savings account in her name. Beyond that she has no investments. She, being a non-working member does not get any tax benefits so it does not make sense to put investments in her name. Though the case of Mrs. Smith may sound a little abstract it is not far from reality when it comes to homemakers who leave most of the financial planning to the earning member, are not well informed about the financial decisions, do not participate in the financial planning and may be dependent on others in their senior years.
1. No retirement age for homemakers
Retirement generally is understood as reaching the age of 58/60 when most people leave active jobs and take up less-strenuous or part-time jobs or may choose to remain at home and follow their dreams. However what is the criterion for homemakers? Do they wake up on the day of their 60th birthday and declare their retirement and say they refuse to do the household chores. So when retirement is planned this aspect is not covered as homemakers do not “retire” and generally women are homemakers.
However with progressing age a homemaker may not be able to handle the housework on her own and she may require help. Also increasing in age is definitely a signal for growing medical bills.
2. Less number of working years
Even when women do work; often their working span is less in terms of tenure when compared to men. They may have to (or choose to) give up their jobs after childbirth or due to some other family requirement. Even if they take up work after a break they might not want to go back to it full-time. This reduces their earning capacity, and in turn their savings potential, which directly impacts their retirement corpus.
3. Longer life spans
The world over, women have a higher life expectancy than men. In India currently the average female life expectancy is 67 and for men it is 64. This means that women need more retirement funds as compared to men. The higher age means you need to have a bigger reservoir to dip into. Progressing age also means higher medical expenditures. With the cost of healthcare skyrocketing, medical expenditure is a big red mark when it comes to retirement planning.
How should women plan their retirement?
Some countries have social security plans while some do not (India being one of them). So in case the woman has not planned her retirement well after the demise of the husband (which is likely as the women tend to outlive men) she might end up being left in the lurch or dependent on her kids. What is surprising is that even today a lot of working women don’t plan ahead for retirement.
1. Start early
If you are a working woman you need to start early even more so if you are not sure when your career may have to take backseat due to family obligations. Also another thing retirement planning for women takes into consideration is the need to keep in mind not letting family obligation especially a child’s need overshadow the need for careful and regular savings.
2. Make informed decisions per your risk appetite
Do not depend on your father/brother/husband to give you all the input. Your father may suggest that you invest in saving certificates or Fixed Deposits. This may be a good idea for him but necessarily not for you. Risk appetites change with age so when you are young invest in equity, mutual funds etc. With progressing age shift to safer investment options.
Women generally love to invest in gold; so please take the route of investing in gold in the electronic way rather than buying jewelry which is bad investment choice.
3. Participate and be informed
Whether you are a homemaker, employed full-time or work part-time, it is important that you participate in the retirement planning, are sure about what you are investing in, how much you are targeting to save, etc. Retirement planning for women and men is always done with a clear goal in mind; you should clearly communicate your expectations.
Your spouse may just want a quiet life after retirement while you may want to travel; in either case you need to plan for the finances that are required to pursue your dreams or hobbies. Women need to keep themselves updated whether they are contributing to the retirement kitty or not. Being updated can save them a lot of hassles later on.
4. Keep the longer life expectancy in mind
If you are a husband planning for retirement make sure that you keep in mind the difference in the average expected age. You would not want your spouse to be left without sufficient funds or appropriate information. In case you are the lady then please do keep the fact in mind too.
5. Health insurance is must
Irrespective of whether male or female, getting adequate health coverage is important to cushion you from sudden, huge, financial burdens. Taking a health plan early on makes more sense as with growing age getting an appropriate health plan becomes not only difficult (more tests are required) but also expensive.
Retirement planning for women is an important financial milestone and should be planned carefully. Women need to pay more attention to their retirement and finances so you can walk into your sunset years financially secured!