The Smart Girl’s Guide to Finance: How to plan for your retirement fund

We speak with financial planners and experts to put together a handy guide for women to navigate the retirement warren

Imagine the picture-perfect Instagram post: one overlooking the Amalfi coast, your painted toes glistening in the sun, causally parked next to an upturned book and a Bellini at hand.

Wouldn’t it be blissful if retirement looked like that? However, for most, planning and saving towards a retirement fund is no mean feat. For women, this journey can be a slippery slope as they juggle several responsibilities including motherhood and caring for elderly parents along the way. Moreover, women tend to live longer than men, which means their nest egg has to last longer, but continue to earn less due to the gender pay gap. This essentially translates into the fact that women must work harder and longer than men.

While the odds may be stacked against them, financial experts offer advice on how women can navigate the retirement labyrinth.

Accept that you will live longer but with less money

According to the Economic Survey 2021-22, Indian women are expected to outlive men by a couple of years. “Women have a higher life expectancy than men, so when they are planning for retirement, they need to keep a few things in mind,” says Vishal Dhawan, CEO and founder of Mumbai-based Plan Ahead Wealth Advisors. “There is every likelihood that they will outlive their partner. A longer life expectancy means that you will need a larger retirement corpus. Secondly, women will have to independently learn how to manage their own finances,” he says. Women also tend to be on the back foot when it comes to building a corpus for their retirement. Responsibilities such as motherhood, taking care of parents or taking a break to support your child during a crucial academic year means that they are either dropping out of work to stay at home or accepting jobs that offer more flexibility but low pay.

Stop hiding from your money

Only seven per cent of women in India invest independently through self-learning, according to the Women & Money Power 2022 survey by LXME, a financial platform for women. The survey, which reached out to 4,000 women from India in the 21-45 age group noted that seventy-six per cent of respondents took assistance from their partners and family to make key financial decisions. “It is important for women to understand where their money is invested should she ever need to manage it. In a traumatic situation, having to figure out and manage finances becomes doubly challenging if you have never done it before or are not familiar with it,” says Kiran Telang, financial planner, and author of Mindful Retirement and Moneywise-Perspectives for Women.

For starters, be a part of the conversation with financial advisors and planners about your investments and savings. It is crucial to know where the money is parked, as well as nitty-gritties such as the account numbers and passwords. “Be aware of how much is coming in, how much is going out and where the investments are being made. Even if you don’t know the operational aspects of managing the money and have outsourced it, you need to be in touch with the investment advisor,” she adds. Secondly, it’s never too late to learn. There are several books, websites and online resources to help you learn about financial instruments. Finally, don’t be afraid to ask questions; no one was born knowing the difference between a bond and a stock.

Start early, even if you start small

The earlier you start saving the better off you are. Setting up an auto-debit system is a good way to build this nest egg. The money is ferreted away before you have had a chance to spend it. Even if you can’t afford to save much initially, experts say, it is better to start with something rather than nothing.

As your goals mature, it is crucial to have conversations with your partner, or as a single woman, your advisor, on what kind of retirement you envisage. “Do you want to travel the world and live in a metro city or is it going to be one of those retirements where your cost of living is controlled with limited aspirations? How much you require is going to be a function of that,” says Dhawan. The number, experts say, needs to be nuanced, taking into consideration where you might want to live geographically, from a safety and security perspective–would you move closer to your children? Or prefer to stay in an independent community?

Insurance is key

Before launching into retirement planning, ensure that you and your family are protected against unforeseen risks. “Insurance is the first step towards building a sound financial plan,” says Telang. This could be in the form of health insurance, general insurance and life insurance, as emergencies emanating from sudden expenses in these areas can set you back financially and even push you into debt. In the case of health insurance, experts recommend taking a long-term perspective. “This is one area where costs spiral very rapidly. If someone at 50 is evaluating how much insurance they need, you must ensure that the sum insured today will still be adequate 20 years down the line when she is 70,” says Dhawan. If you have dependents or have financial liabilities such as a home loan, it's crucial to get a term-life insurance to secure your family in the event of your death. Moreover, experts strongly recommend having these in place independent of whether your organisation offers them as perks. “If you lose your job, you also stand to lose that insurance,” reasons Telang.

Set up an emergency fund

Whether it is a planned sabbatical to look after children or an emergency such as job loss, unexpected medical expenses or even death, an emergency fund offers a financial buffer to get back on your feet. Experts say that if both partners are working, then the fund should ideally cover three months of expenses and six months of EMIs. If it is a single earning member, it should cover six months of expenses and 12 months of EMIs.

Make your money work for you

For women, not only does the retirement corpus have to be larger to last them longer, but must also hold good in the face of rising inflation. “As the corpus needs to be higher and the inflation impact is likely to be more, they need to be comfortable with having some exposure to inflation-beating assets in their retirement portfolio,” says Dhawan. “Beyond equities, one of the things they can look at is real estate investment trusts (REITs), giving access to real estate, which is much more manageable than traditional physical real estate,” he says. Experts also recommend looking at investment options built specifically for senior citizens, but to carefully weigh in on the liquidity versus benefits before investing. Investment options such as the Senior Citizen Saving Scheme, Pradhan Mantri Vaya Vandana Yojana, GoI floating-rate bonds, GoI securities can be used to generate regular income and take care of retirement. In addition to this, they should be looking at tax-saving investments to maximise their retirement benefits.

Plan that break

Retirement planning for women is unique in more ways than one. To begin with, unlike men, women may take several breaks in their careers–as stay-at-home mums or to look after elderly parents. The ideal way to approach these breaks, and the subsequent drop in income, is to plan ahead. You can then start saving in advance to roll back any unnecessary expenditure.

It also gives your employer enough notice, so bridges are not burnt when you do decide to go back to work. It is crucial, however, to keep in touch with your work, take a course or upgrade your skills. Alternatively, you could look at generating income from a hobby you can monetise to boost your income during this time.

Make a will

A crucial part of your retirement plan should be to have a will and power of attorney in place. A registered will, though preferable, is not mandatory. “Family members should be made aware of the location of the will, even if the contents are not disclosed while the person is alive,” says Dhawan. Moreover, if you own real estate, having a will makes it easier for your legal heirs to inherit the property, says Telang, citing complex succession laws in India.

Consult a professional

Retirement planning is a long-term goal. Consulting a financial advisor can help you work towards a suitable plan as opposed to replicating something your friends or family have picked for themselves. “When you start saving for retirement, there are a lot of things along the way which give you instant gratification–an international holiday or a new car. So it’s very tempting to dip into your savings for those indulgences. A professional can help you stay on track and balance instant gratification against delayed gratification,” says Dhawan.

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