How Can Women Boost Their Retirement Savings with Systematic Investment Plans (SIP).
With an exponential growth in women’s education resulting in more and more women taking up employment on par with men, the family income also tend to go up. But women although were known to have more savings habit, now a days do not venture into serious financial planning which needs to be addressed. Women also should separately take up their own medium to long term investments for their independent days at a later stage. They should keep at least 10- 20 % of their income by way long term savings like Insurance, Equity shares, MFs etc.,
Women in particular, employed, will find the narrative below interesting and useful:
Everyone wants to have a tension-free retired life. However, retirement planning varies widely for men and women. Women tend to rely on their male partners or family members to take care of their finances.
However, women need to plan for their retirement. When it comes to retirement planning, women have a lot on their plates to handle than men.
A woman’s median expected lifespan is 2.7 years longer than the average man’s lifespan. This means that women tend to live longer alone after a partner’s death, increasing their need for retirement savings.
Moreover, women may have fewer working years as they might take breaks to start a family or take care of the elderly.
And one of the easy ways to save for retirement is by investing in mutual funds through the Systematic Investment Plan (SIP).
What is SIP?
The Systematic Investment Plan is an investment facility through which investors can automatically invest a predetermined amount at regular intervals in a mutual fund of their choice.
Mutual funds invest in different asset classes, such as equity and debt to fulfil financial goals. So, one can invest in mutual funds as per their risk tolerance and investment horizon.
Here are some steps that women can take to plan their retirement through SIP.
Start Investing Early:
It is never too early to start investing for retirement. The longer you stay invested, you may have a higher potential to accumulate wealth through the power of compounding.
Let us take an instance to show you what we mean. Let us assume that there are two friends. One of them started investing Rs. 10,000 per month when she was 25 years. She continued investing for 30 years. Another friend started investing when she turned 35. But she has to invest nearly Rs.35, 000 per month to match her friend’s retirement corpus of Rs.3.50 crores.
So, we see that investing even a tiny amount during the early years can help to build a sizeable retirement corpus.
Increase SIP at Regular Intervals
We have seen how investing a small amount can lead to significant gains. However, you can boost your retirement savings by increasing your contribution or SIP amount regularly.
As your income increases, you may be better prepared to increase your SIP amount towards retirement planning. At the same time, you may have to take care of other financial responsibilities. You may not be able to invest a higher percentage of your total investments towards retirement.
The main thing is to increase your SIP amount by a minimum percentage every year. If we consider that Person A steps up the SIP investment by 5% every year, i.e., she invests Rs.10, 500 per month in the second year, and so on, she will accumulate Rs. 4.97 crores after 30 years.
Retirement is a long-term financial goal. And it is very natural for investors to change their investment plans in this timeframe. So, one investment plan for women may not suit everyone.
So, it is essential to evaluate every individual’s retirement investment portfolio to consider any changes in the respective risk tolerance and investment horizon. As you progress in life, you may want to reduce the underlying risks in your portfolio. In this scenario, you may reduce your SIP in an equity fund or set up a new SIP in a debt fund. So, you have multiple SIPs running at the same time to fund your retirement corpus.
In retirement planning, the decks may be stacked against women. So, it is essential for women to take control of their finances and start investing for retirement right away.
Investing in mutual funds of your choice through the Systematic Investment Plan is a simple way to start retirement planning.
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