Opinion | Why retirement planning can’t be a couple goal

Is retirement planning a couple goal? Yes and no. Although married couples plan for a combined retirement plan, there are many variables to this goal because it’s the longest period in one’s life that needs to be planned for and, therefore, is far more complex than a one-time goal. Here are the factors beyond that magical retirement corpus target amount that differentiate retirement for women and men.

Women are from Venus

Longer life, larger corpus: Women win the battle of sexes and live longer, but then they need to muster up more savings for those extra years. According to United Nations population estimates, the life expectancy for women in India is 69.8 years compared to 66.8 years for men. Due to this, women may outlive the retirement kitty built for the couple. Therefore, the financial fortification for women must be more.

Higher healthcare costs: According to Fidelity Investments annual retiree report, a 65-year-old couple retiring in 2018 will need a corpus of about $280,000 to cover their medical expenses in retirement. However, this is not an even split. Since women have longer life expectancy, they would need about $147,000 whereas men would need about $133,000.

Gender bias: Let us face it, in India women earn 20% lower than men, according to the Monster Salary Index (MSI). Therefore, if a man is earning ₹40,000 per month at 40 years of age, and saves 10% of his monthly income towards savings for retirement, his corpus would grow to ₹30,62,000 at 60 years considering a 10% return. The woman will earn ₹32,000 per month and if she saves 10% of this amount for retirement, the corpus will grow to ₹24,50,000. This is 25% lower than the corpus accumulated for the man, even though the savings have started at the same time, albeit at a lower amount.

Fewer work years, more breaks: Even if a woman starts working at the same age as a man, earns the same starting salary and continues up the corporate ladder, and saves the same percentage of her savings , a career break—often due to family commitments—adds a spoke in the wheel. Women who take a break in career, either due to pregnancy or because they have to take care of their old parents, always miss out on yearly contributions towards savings for their retirement corpus and, therefore, compromise on the benefits of compounding over the long term. The paradox here is that woman will need a bigger corpus for a longer period in her retirement, but the man has been able to save up more because of a higher and uninterrupted savings.

More conservative investors: Due to the myriad roles a woman plays as a mother, daughter, wife and sister, she is constantly multitasking. She is aware of the emergencies, breaks in her career and in her savings potential. Therefore, she is a conservative investor. This does not help very much when retirement is many years away and investing in equity would be the right thing to do. Yet, because of uncertainties, it is part of her DNA and she puts safety over risk at all times.

Marriages are not made in Heaven

One always hopes for a retired life as a “couple” and spending time together to do the things most retired couples do together. However, the possibilities of getting widowed or even divorced early on would change the equation and the retirement kitty. Such situations can drastically affect the retirement plan.

What women can do

The longer you put off planning, the greater the chances that you won’t have enough to spend in retirement. Think about how you want to spend each day, where you want to live, how often you would like to travel. Look at your spending, debt and savings, and ask yourself where you could spend less.

Talk with your spouse about how retirement spending would impact women in particular and discuss about how major life turns would further complicate issues. Remember to plan your portfolio in such a way that it lasts longer. Consider the pros and cons of investing in equity and remember the power of compounding works wonders. So start early and save regularly.

Take charge of your finances today. Ask questions, stay hungry, know that your bases are covered and, above all, be present in all financial discussions your husband has with his advisor.

Dilshad Billimoria is director, Dilzer Consultants Pvt. Ltd