5 Retirement Planning Tips for Women

Published On: 05-Feb-2020

While we talk of financial planning for working women, there are some inherent trends seen in the way women handle their finances. 

Here are five retirement planning tips for women:

1. Budget for your savings

Warren Buffet, one of the greatest investors, once said, “you must not save what is left after spending, but instead spend what is left after saving.” As woman manage their household budgets, it is essential that they also budget for savings out of their household budgets itself. Such budgeting makes it easier to plan for savings, as you have already adjusted your monthly expenses within the net income. Further, once you sit down to check the actual figures as against the budgeted ones, it automatically helps you keep a tab on your savings as well. 

2. Take charge of your investment decisions early 

It is the general tendency among women to have savings. But, they do not realise the importance of investing the money and grow their savings. Investing your savings wisely in suitable investments is equally vital as it helps your money grow instead of letting it deteriorate due to the decrease in the purchasing power of the currency. For example, if you save Rs. 5,000 every month, the portfolio will be valued Rs. 1.54 crores over 30 years (assuming annualised returns of 12% per year on your monthly investments) as against total savings of Rs. 18 lakhs if you keep the savings at home. 

It is crucial to take charge of the investing decisions at an early stage, as any delay in starting to invest may cost you dearly. After all, investments are more about spending ‘time in the market’ instead of ‘timing the market.’ Continuing with the above example, if you delay saving by ten years, after 20 years, you will have an investment portfolio of Rs. 49.55 lakhs.

3.Review your investment periodically 

Staying in control of your finances and investment plans also calls for regular monitoring of your portfolio, so that you do not fall short of your financial goals. It is noticed that the financial goals of women are more attached to their family’s priorities. As such, any shortfall in the investment corpus may call for corrective action in the financial plans to achieve your goals. 

 4. Have a systematic asset allocation

Women generally tend to be conservative in their investment strategies and hence, a significant part of their investment portfolio may be concentrated in traditional investment avenues, like bank deposits, and insurance policies. Even when they invest in mutual funds, they invest mostly in relatively less-risky asset classes like debt. However, to reap the potential of wealth creation in equity over the long term, one must consider investing the savings in equity mutual funds as well. Even a 1% lower return can impact your investment corpus significantly. For example, if monthly investments of Rs. 5,000 yield 11% annualised growth instead of 12% the investment portfolio will grow to Rs. 1.26 crores over 30 years, instead of Rs. 1.54 crores. Further, to balance the risk profile with the investment portfolio, the women investors may also have a prudent asset allocation strategy of investing in both equity and debt. 

5. Make your investments tax-efficient 

Taxes may also eat into your investment corpus, as the returns from fixed deposits are taxed as interest income, while the appreciation in the mutual funds will be taxed as capital gains. However, one can suitably plan their investments to create a tax-efficient investment portfolio. Further, the taxpayers can also combine financial planning with tax planning and may consider investing in Equity Linked Savings Scheme (ELSS) for getting tax benefits under Section 80C.

While women continue to shoulder the family responsibilities with men, it is the time now that women start taking care of their financial goals and retirement planning for themselves and their families. At the same time, while you may feel that the above tips are meant explicitly for women, these investing principles stay equally valid for men as well.