It is important not to confuse your current financial independence with financial freedom.
It is truly wonderful to see so many women taking charge of their financial lives. The number of women who contribute to the household finances has increased manifold in the last decade. Thanks to the change, there is a sense of satisfaction among women who take pride in the fact that they are financially independent.
However, it is important not to confuse your current financial independence with financial freedom. By being financially independent you are able to take care of your personal expenses at present. When you are financially free you are able to maintain your desired lifestyle throughout your life-time, including your retirement. This is not going to happen automatically just because you earn ave an income. It requires thought and planning and is more challenging for women than it is for men.
You may ask - why would I need to plan for a separate retirement? Is it not a family goal? Yes, it is and it is likely that you have a substantial retirement pot to which both you and your spouse has contributed, and it should suffice to live a peaceful life. However, there are reasons why women need to be specifically prepared for their retirement as well.
During my financial planning practice, I have some across cases where the plan went haywire due to a separation/divorce, which the woman did not see coming. There are others who are forced to take charge of the situation after being widowed and had no idea where to begin. In addition, there are some societal factors which makes planning retirement for women more challenging and important.Women are paid lesser than men
There is no parity in pay as much as we aspire for it. Women are paid lesser than their male counterparts. I have come across a few couples who were classmates from premier business schools and now married to each other, and it is an eye opener to see the gap in their salaries.They take more breaks in their career
Women take breaks more often than men. Breaks are for any number of reasons, the primary ones being child care or caring for older family members who are ill. It could be giving up a good job due to transfer of the spouse and not being able to find something suitable. Anyone who has taken a break will tell you that getting back into the saddle after a break is never an easy task. One may have to settle for less than what one is capable of.Life expectancy of women is higher
This is not confined to India alone, it is a global trend, women live longer than men. That would mean a higher retirement corpus will be required to account for the longer life span. Longer lifespans also mean higher expenses on health care, which need to be planned for.Women tend to be more conservative with investments
Generally, women are averse to taking any kind of risk and prefer safe investment routes. They are happy to accumulate lower return instruments since it means higher safety. This limits your ability to build meaningful wealth. I recently had a client who was running her own business and her husband was salaried. Since taxation on debt was unfavourable, she held all the debt investments and he the equity investments. The worst part was she was very well informed and taking her own financial decisions. When they suddenly split, the assets were divided unfairly in favour of the husband.
So, what can you do to ensure you are in control of your future? Being aware of the above challenges is half your battle won.- Start investing early for your goals. Choose investments that build wealth, keeping in mind the goal's time horizon.
- Find a trusted financial adviser, if need be, to lead you through the maze.
- Protect your incomes through adequate life insurance. Purchase a health insurance policy today.
- Keep a contingency fund ready for that break that you may need to take.
- And stay in touch with your network and keep honing your skill-sets to remain relevant even when you are on a break.
More importantly, participate in family financial decisions, even when your retirement looks comfortable as it does not hurt to know. Invest time and effort in understanding the basics of finance and your family’s personal finances. Ensure you are not carrying dud investments in the name of safety. Take time to understand and make note of your plan for retirement and review it without fail.The author is a Certified Financial Planner and Founder of Finwise Personal Finance SolutionsThe Great Diwali Discount!
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