Retirement, Pension Planning: For 40, 35, 30, 25 or Under 20 Years – Here’s What Women Should Do in 2022

By Priti Rathi Gupta

In this century, the average lifespan of a person has increased by 30 years, so it is very likely that we will reach 100 years thanks to better lifestyles and medical advances. What does retirement mean then? Possibly more sabbaticals on the way, and definitely more health care spending later in life. It is important to reorganize and restructure our financial planning given the above facts. Even more so for women, where the average lifespan is 4 to 5 years longer than that of men, while incomes are lower than those of men. Retirement at some point is almost inevitable! As a senior, your expenses will continue but your income will stop, so you’ll need a good financial cushion to support yourself during the retirement of your dreams.

Here’s how you can build a substantial retirement body for yourself, based on your age:

Planning with 35-40 years for retirement

Starting young gives you the advantage of a head start and experimentation with different types of products. Any wrong decisions made now can be rectified in plenty of time before retirement. The power of compounding can show wonders from this stage on. Investments in stocks and mutual funds among market-linked returns help multiply the corpus over time. Especially in beating inflation. To instill a saving habit, you can start by hiring SIP. Remember to diversify your investments across different products to benefit from different risk and return profiles.

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Planning with 25-30 years for retirement

It’s still not too late to start planning for your retirement, with about 30 years still available to build a sufficient corpus. Risk appetite may be lower than in your 20s, it’s crucial to have an emergency fund, with at least three months of expenses, and allocate about 30 percent of your savings to a retirement fund.

Planning with <20 years for retirement

When making crucial financial decisions, it is always better to start late than never. With considerably less time to plan for retirement, start by cutting out unnecessary expenses and be sure to allocate at least 50 percent of your retirement savings (more if you can manage). At this stage, it’s important to assess your assets and see how they might fit into your retirement plans.

It’s never too early or too late to start planning for your retirement. What is necessary is to take that first step. Here is a list of some important ways you can create your retirement plan:

  • Increase your investments based on your income: It is important, from the earliest stages of life, to choose an investment that will pay dividends when needed. Along with your career chart, as there is an increase in profits, you will surely reach a stage where you can increase your investment volume.
  • Start early: It’s important to start early, start small, and start investing in assets that harness the power of compounding like equity mutual funds. The younger the person is when they begin relegating funds to a retirement investment, the longer the accumulated term and resulting payout will be when the investment matures.
  • Relegation of a fixed amount for the retirement corpus: Investing a fixed percentage of your income in retirement principal always helps. Keeping this corpus intact before retirement is key.
  • Stay on top of inflation: Inflation greatly affects financial planning. When planning, you should always take into account all the factors that can affect your returns. Inflation can cause your returns to plummet, and so when choosing any plan, you want to make sure you’ve taken into account futuristic projections of price increases.
  • Buy health insurance: Always make sure you and your family are protected with adequate insurance. Uncertainties don’t knock on the door, they are sudden and upsetting, emotionally and financially. Our study indicated that 58% of women do not have health or life insurance in their name. So cover yourself and your loved ones with health and life insurance to ensure your family’s financial stability at any stage of life.
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Highlighting the huge gap when it comes to women and retirement planning is of paramount importance if we want to prevent women from heading for a bad retirement. A survey by LXME and AxisMyIndia shows that only 2 out of 100 women are making an active financial plan for their retirement!

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Today’s women are excelling in all fields of life and are becoming more and more independent, yet their financial planning continues to take a backseat and is primarily in the hands of the men in the family. Our study on women and their money power revealed that, overall, 51% of women in the country do not invest at all or are not aware of their investments. This brings to light the need to educate women about the importance of financial planning.

However, managing money in the midst of other priorities is easier said than done. There are multiple barriers for women of all ages and backgrounds that put pressure on them to earn enough, access education, care for a family, and plan for retirement.

Women have different financial needs; differentiated earning potential, career peaks, career breaks, increased life expectancy, and a different approach and mindset towards financial planning. Therefore, it is imperative that women take charge of their money through smart planning and investing that best suits their needs. Consider options to finance your retirement and secure your financial future. Talk to a financial advisor about your current situation and stay informed about all the options available to you to stay financially healthy at every stage of your life.

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(The writer is the founder and MD of LXME, India’s first women’s neobank.)

{The opinions expressed above are those of the author and not necessarily those of Consult your financial advisor before making any investment decision)