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Women's Day Special 2019: How should women plan their retirement?

By Anuj Cariappa
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The value of rupee is decreasing with time, especially as inflation rates hover between 6 to 7%, with medical inflation reaching up to 15%. Whether you're working or not, maintaining the same lifestyle once you retire becomes difficult when you don't plan your retirement, and start saving early enough.

How Should Women Plan Their Retirement?

For women looking to secure their financial health, retirement planning is a prerequisite. Amid increasing economic fluctuations and increasing inflation rates, here's how you can start planning for your retirement.

Start early because the early bird catches the worm

If you start planning and saving for your retirement in advance, you can save and invest via a longer tenor, gain from the compounding power of interest, and enjoy ample time to correct your investment mistakes.

Also, in your early years, you may not have many financial responsibilities, which gives you the room to increase your risk exposure and invest aggressively. On this front, investing in equities (direct or via SIP) can earn you handsome capital appreciation in long term. You must consider increasing your retirement savings with every hike in your salary to build a strong corpus.

Take stock of your finances bi-annually

Depending on the phase of your life, you may have to shoulder a range of responsibilities like buying a home, paying for your kid's education, taking your family on vacation, offering financial aid to your parents, and also planning your own retirement. Thus, it is important to review your finances from time to time, ideally twice a year.

Monitor your expenditures, debts, and savings. If need be, take up freelancing to add to your income. Cut back on unnecessary expenses and work out a realistic budget. This will help you with the next step: investing.

Invest as per your risk appetite to optimise returns

With higher risks come higher returns. However, your capacity of risk changes as per age, responsibilities, and financial obligations. As a young investor, you may have lesser responsibilities that make it ideal to take high risks. So, you may consider investing in equity, mutual funds, and others.

Additionally, you can also benefit from your employer-provided investments like EPF that offer high returns at low risk. Next, as you advance in age, with increased financial responsibilities and dependents, your main objective must be to secure the existing corpus than gambling with it. Shifting from high-risk investment options to low-risk options is the ideal way forward.

Make fixed income schemes a must

Including fixed income investment options like bonds, treasury bills and fixed deposits for women in your retirement portfolio is a must. This not only helps you balance out the risks exposed by investing in equities and other high-risk investments, but it also gives you guaranteed returns. To start with, you can invest small amounts in FDs. Once you accumulate a lump sum, you can reinvest it and earn additional interest rates. For a clearer picture, here is an example. Say that you ladder your FD investments in the following fashion:

  • FD 1 at age 27: Rs.1 lakh for 5 years at 7% interest will give you maturity proceeds of Rs. 1.4 lakh.
  • FD 2 at age 29: Rs. 2 lakh for 7 years at 7.5% interest will give you maturity proceeds of Rs.3.3 lakh.
  • FD 3 at age 32 Rs.5 lakh for 7 years at 7.75% interest will give you maturity proceeds of Rs.8.4 lakh.

Every time a fixed deposit matures, you can renew it and enjoy additional interest earnings. This way, together with your other retirement investments like PPF, EPF, and NPS, you'll end up accumulating a hefty corpus by the time you reach retirement. You can look for financiers like Bajaj Finance offer lucrative fixed deposit interest rates of up to 9.10%.

Keep abreast of the markets and monitor your portfolio accordingly

Finally, keep an eye on the financial markets, interest rates, and investment instruments. This helps you monitor the performance of your folio and take strategic decisions from time to time to benefit from current market situation. This also helps you spot the potential increase in returns. For instance, if you invest in a particular stock and don't look back, you may not be able to draw from the fluctuations. You will never know if the stock is adding to your wealth or weakening your folio. In contrast, if you keep a tab on its performance, you can either increase your investment or reallocate the funds to other schemes, as per its performance.

Take note of the fact that deposit interest rates move in line with repo rates. Thus, if there is an interest rate hike and you are aware of it, you can earn better by re-allocating your funds from less profitable avenues. Keeping a tab on tax rules also will help you benefit from deductions and exemptions. For example, the Interim Budget 2019 has proposed to increase the TDS deduction limit on bank and post office FD interest to Rs.40,000. Based on such information, you can increase your FD investments and gain from tax exemptions on higher returns.

Sometimes, in a hurry to meet other goals, your retirement savings can take a back seat. But don't forget to focus on the bigger picture. Only then, you can enjoy a comfortable retirement and enjoy your golden years to the fullest.

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