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How are men and women different in retirement planning?

By Finserv MARKETS - Mar 5,2021
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How are men and women different in retirement planning?

Retirement Planning: A Meticulous Strategy

Enjoying a delectable glass of wine while having a relaxing sit-down lunch with family and friends is one of the best feelings to experience. But the journey from selecting the best quality grapes to pouring a fine glass of wine involves a lot of patience throughout the whole process of manufacturing to fermentation to bottling of the wine. Retirement planning is no different! The contentment of being financially independent even after retirement is again a very fulfilling experience which can be achieved by prioritizing life goals, mapping the financial requirement to achieve these goals and creating ample wealth in time to enjoy it with your loved ones.

It is also interesting to note, how gender difference can change the outlook towards retirement planning for men and women due to the difference in life expectancy and constraints resulting from traditional gender roles. If you are a 25-year-old woman, retirement planning might be the least of your concerns at this stage of your life, but it’s time you think through this again. On an average, women tend to live longer than men, which makes retirement planning a crucial part of their lives. Hence, starting early on and planning effectively can improve your chances of retiring comfortably. Nearly every woman will have financial responsibilities at some point in her life whether she chooses to marry or not.

Here are a few reasons why financial planning for retirement goals works differently for women:

  • Women tend to be the primary caregivers

Women are generally the primary caregivers for their children, especially when they are young. This is a long-term investment of time and effort that can take a toll on their financial health after retirement. If you are a home maker, you could miss out on years of earning an income and the benefits of compounding on investment at the right stage. Death or separation from her husband also leads to a lack of financial support for a woman. In this case, she might face the lack of a support system to enable her to thrive at her workplace and earn a higher income.

Women also tend to be caregivers for their ageing parents. This can further impact their retirement corpus. While accessing maternity leave or taking time off from their work to manage responsibilities at home, women can end up reducing the number of hours that they work and even their chance at a promotion.

  • Wage gap

According to the Gender Gap Index by Press Information Bureau in 2020, India has slipped to the 112th position from the 2018 rank of 108th. Moreover, as per the report, our nation would take close to a century to bridge the gap in areas of economy, health, politics, and education. As per the Monster Salary Index report, women earn 19% less compared to men, in India, with men earning Rs. 242.49 and women getting a lower amount of Rs. 196.3.

What these numbers highlight is that women tend to earn less than men and therefore tend to save a lower amount. For example, if a man earns Rs. 50,000 per month and parks 10 percent of his monthly savings for retirement, he could save up to Rs. 60,000 each year. A woman, on the other hand, potentially earns 20 percent less salary that results in an income of Rs. 40,000 and savings of Rs. 48,000. The gap can be attributed to occupation segregation, i.e. female-dominated positions generally earn less as compared to male-centric jobs.

  • Higher life expectancy
    Women tend to live longer. With a higher life expectancy of 69.9 years at birth, women tend to outlive men by about three years. At the retirement age, a woman’s life expectancy stands at 78.6 as compared to 77.2 years for men. This essentially means that women need to plan for a bigger retirement corpus to last the number of years.

There is another layer to this argument. Women could end up paying more in healthcare costs on retirement. The higher life expectancy leads to more healthcare expenses.

retirement planning
Source: Economic Times

  • Women are conservative investors

Women tend to be more risk-averse, which is a beneficial approach when an individual is nearing retirement. However, it means less growth in the retirement corpus during the accumulation stage of the investing years.

  • Women might find it difficult to seek financial advice

In a 2015 study, it was demonstrated that 56 percent of women refrained from talking about their finances for varied reasons including that it was too personal a subject. Further, 10 percent of women said that they did not know how to talk about finances in a logical manner. When they were asked about seeking help from an adviser, 47 percent of women said they were hesitant in speaking to a professional.

Women should have a personalized financial strategy in place in their endeavor to plan for retirement. Prudent planning can provide a better sense of security. It is never too late to approach a financial professional to learn more about investing your income in a fund such as a Unit Linked Insurance Plan (ULIP) that provides the dual benefit of security and investment returns.

The Bottom Line

Life without financial planning is as pointless as a hook without a bait. Hence, the earlier you begin, the better it is!

While you plan your finances, set your strategy right so that you can effectively build your retirement corpus. With online platforms like Finserv MARKETS, you can choose an ideal financial plan that meets your unique needs. If you are a woman who has avoided financial planning in the past, now is the time to get involved and work towards accumulating a corpus to accomplish your life goals. Start today!

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