7 Practical Tips to Help Women Achieve Financial Security in Old Age with Retirement Planning

With more women joining and excelling in traditionally male-dominated fields, the workforce has undergone a tremendous change over the last few decades. More women are now financially independent, and many of them are working in high-paying professions and investing in new-age investment avenues. However, despite these positive changes, women still continue to face unique challenges when it comes to securing a financially stable future. A few of these challenges include lower pay, lesser opportunities for career progress, and heavier loads of responsibilities of taking care of children and elderly family members. These factors may lead to lesser retirement savings and a higher likelihood of experiencing financial hardships as they age.

Since many women struggle to secure a financially stable future because of the several challenges that they face while working and post-retirement, to ensure they have a comfortable retirement, women need to prioritise retirement planning. This article provides 7 practical tips to help women achieve financial security in old age with retirement planning.

Here are the challenges that women typically face when it comes to securing a financially stable future:

1. Longer Life Expectancy:

Women have longer life expectancy than their male counterparts, which needs to be considered when creating a retirement plan for women. They need to plan for a longer retirement period and ensure they have sufficient savings to cover their expenses for those extra years. This can be challenging if women have not saved enough during their working years or if they have not invested their savings appropriately.

2. Gender Pay Gap:

Women earn less than men on average and it impacts their ability to save for their retirement. Besides, the gender pay gap can lead to missed opportunities for career progress, which can further increase the retirement savings gap.

3. Career Interruptions:

Women often have to take career breaks to take care of children and/or elderly relatives. The societal expectation that women are primarily responsible for caregiving can impact their ability to work full-time and advance their careers.

Career interruptions can have a long-term impact on a woman's retirement savings, as women may miss out on opportunities for career advancement, salary increases, and retirement benefits like pensions.

Furthermore, women who take time off from work to take care of their children or elderly relatives may have to bear the child's expenses (in case they have no financial support from the other family members) and they may face challenges when trying to re-enter the workforce. They may also experience a skills gap or find it challenging to find job opportunities that pay well and offer retirement benefits.

To overcome this challenge, women must advocate for policies that support working parents, such as paid parental leave, flexible work hours, work-from-home, and affordable childcare options.

4. Health Issues in Old Age:

Women are more likely to face health issues and disabilities as they grow old, which can result in higher healthcare costs and the necessity for long-term care. These costs can be significantly high and can impact your retirement savings.

Older women generally face more financial crises than older men, which can be due in part to the high costs of healthcare and long-term care. Women are caregivers for their spouses, children, or elderly family members, which can further strain them and limit their ability to work and save for retirement.

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Here are 7 practical tips to help women achieve financial security in old age with retirement planning:

1. Save More:

Women are often known to spend more than men, enjoying activities like shopping and dining out. While it may not be always true and there is nothing wrong with treating oneself, spending excessively on unnecessary things can lead to financial problems. You must not spend all of your income on luxuries and should strike the balance between spending and saving for the future. Failing to prepare for emergencies could make you feel vulnerable in a financially challenging situation. Thus, it is essential to consider different investment options and plan for future financial stability.

2. Start Investing Early:

Starting to save and invest for retirement as early as possible is important in securing a financially stable future. By beginning early, you give your investments more time to grow and compound. Over time, this can result in a significant difference in the final value of your retirement savings. Making regular contributions towards your retirement fund can also help in increasing your savings and building your retirement nest egg. Even small contributions made early on can make a significant difference in the long run. By starting early and consistently contributing to your retirement fund, you can set yourself up for a financially secure retirement and enjoy your golden years with peace of mind.

3. Create a Retirement Fund:

While retirement may seem far off in the future, it is still important to plan and invest towards it. In India, women tend to favour investing in safe fixed-income products such as bank fixed deposits and recurring deposits as they are perceived as low-risk and easy to comprehend. However, you need to recognise that no investment is entirely free of risk, and there is a certain level of risk associated with every potential return.

Although fixed-income products offer guaranteed returns with low risk, they usually yield lower returns than the inflation rate. Therefore, investing in them for the long term may not be sensible. On the other hand, market-linked financial instruments such as stocks and equity mutual funds can generate inflation-adjusted returns and create wealth over the long term but come with higher risks.

To mitigate risks, you can consider diversifying investments by allocating a small portion to safer financial instruments. Portfolio diversification can help you minimise risk and optimise returns. Mutual funds are a good option for many investors as they offer professional management and diversification. By investing in a range of securities, including stocks and bonds, investors can spread their risk across different assets, reducing their exposure to any single security and providing a more stable investment experience.

4. Automate Investments:

To ensure that you save a fixed amount each month towards your retirement goals without fail, it is a good idea to automate your savings towards a retirement fund. By setting up automatic payments, you will not have to worry about remembering to save each month and you will not spend it on other expenses. This can help you stay on track towards achieving your retirement goal.

Investing in carefully selected equity mutual fund SIPs can be a good choice for retirement planning as they allow you to invest small amounts at regular intervals, such as monthly or quarterly. This can help you build a retirement corpus over time, without making large lump-sum investments. SIPs allow you to take advantage of market fluctuations and invest in a diversified portfolio of stocks and other securities and hence have the potential to generate better returns over the long term. Moreover, SIPs offer the benefit of compounding, where the returns earned on your investments are reinvested, leading to higher returns over time.

5. Cover Yourself with Adequate Health Insurance:

As women tend to live longer, they need to invest in health insurance to help cover any unexpected medical costs. Women are more likely to have medical issues in their later years, and the costs associated with healthcare can quickly deplete retirement savings. Investing in health insurance can help protect against these expenses, and ensure that women have access to quality healthcare when they need it. Make sure you research different health insurance options and choose a plan that fits your individual needs and budget.

6. Create an Emergency Fund:

Planning for unexpected events through an emergency fund is necessary in order to achieve financial security in old age. This fund should be readily accessible in case of unexpected expenses such as a loss of a job or a medical emergency. It is recommended to have at least 6 to 24 months' worth of living expenses saved in an emergency fund. By having an emergency fund, you can avoid having to dip into your retirement savings or going into debt to cover unexpected expenses. You should regularly contribute to your emergency fund and only use it for true emergencies, not for non-essential purchases. You can start investing in a separate savings bank account or an investment option that allows you to withdraw funds whenever an emergency occurs. By having an emergency fund, you can have peace of mind and be better prepared for unexpected events that may impact your financial security in retirement.

7. Seek Professional Help:

Seeking professional help from a financial advisor can be an effective way to create a retirement plan tailored to your specific needs and goals. A financial advisor can provide valuable guidance on retirement planning strategies, investment options, and risk management techniques. They can help you understand the implications of different retirement planning decisions and create a personalised plan that takes into account your financial situation, risk tolerance, and retirement goals. By working with a financial advisor, you can gain peace of mind knowing that you have a well-crafted plan in place to help you achieve financial security in old age. Additionally, a financial advisor can provide ongoing support and guidance, helping you adjust your plan as the circumstances may change over time.

To conclude:

Achieving financial security in old age through retirement planning should be a crucial goal for women. Women face unique challenges such as the gender pay gap, career interruptions, and health issues that can affect their financial stability in retirement. To overcome these challenges and secure a comfortable retirement, women should start planning early, consider long-term health insurance, build an emergency fund, and seek professional help. Make sure you diversify your investments and automate savings towards retirement funds, with SIPs being a good option. With careful planning and wise investment decisions, women can retire with financial security and peace of mind.

Happy International Women's Day!!

Happy Planning!!

KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.