Monday, October 23 2017, 11:34:31
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  • fatasstic
  • She Says


  • IWB Post
  •  May 2, 2014

Do you also postpone your retirement plans by saying, “This is not the right age to have a consideration about Retirement” or “I am too young to get Retired”?

With a longer life expectancy than men, women will most likely have more time to enjoy their retirement. But, while living longer is clearly a positive, it also means women have a greater possibility of outliving their retirement savings. Plus, a number of factors put women at a distinct disadvantage when it comes to accumulating enough money for their retirement. So, women need to take control of their financial future with few matured financial decisions that start from the awareness.


There are multiple ways of looking at retirement planning but all involve the following basic steps:

  1. Define post retirement goals and objectives as early as possible.
  2. Start saving for retirement with a corpus objective in mind.
  3. Invest in a manner that balances risk and returns, with decreasing risk as one nears retirement.
  4. Pay off all debt at least 10 years before planned retirement.
  5. Keep aside sufficient funds for emergencies.

What is the appropriate time to start planning retirement?

The right age for retirement plan is as soon as you can. Ideally, you should start saving in your 20s, when you first leave school and begin earning paychecks. That’s because the sooner you begin saving, the more time your money has to grow. Each year’s gains can generate their own gains the next year – a powerful wealth-building phenomenon known as compounding.

What is the Retirement Plan?

A typical retirement plan has two phases.
The first is the accumulation phase, during which you pay premiums and the money accumulates through the tenure of the plan. The accumulated money is then invested in securities approved by the Insurance Regulatory and Development Authority (IRDA), the insurance regulator. These products are designed to protect the value of your principal while at the same time provide you with steady returns.

The accumulation stage is followed by the vesting age, which is the age when you start getting payouts from the kitty. This can be selected by you. The vesting age in most plans is 40 to 70 years. The period when a person gets pension is also called the annuity phase. During this phase, you can withdraw up to 33% of the accumulated amount in one go. The rest is paid as pension.

In the immediate annuity option, a person can pay in lump-sum, instead of over the years, and start getting income immediately. The frequency of payments received can be monthly, quarterly, half-yearly or annually.

How to plan?

Tax-favored retirement accounts such as individual retirement accounts (IRAs) and 401 (k)s are the best places to save for your retirement. The different types of plans have different features, but most of them allow you to defer taxes on the money you save and the returns you earn within the account.

retirement planning

“Tax deferral” means that the amount you contribute escapes the usual income taxes until you start withdrawing the money years later. As a result, more of your money can earn investment returns over time – an enormous advantage over ordinary taxable accounts.

The plans have other advantages as well. For example, many employers will match part of their workers’ contributions to employer-sponsored retirement plans such as 401(k)s.

401(k)s and similar plans – 403(b)s, 457s and Thrift Savings Plans are ways to save for your retirement that your employer provides, or “sponsors.” You may hear people describe them as “defined contribution plans.” That name comes from the fact that you make contributions to the plans – that is, you put your own money into them.

IRA stands for Individual Retirement Account, and it’s basically a savings account with big tax breaks, making it an ideal way to sock away cash for your retirement. A lot of people mistakenly think an IRA itself is an investment – but it’s just the basket in which you keep stocks, bonds, mutual funds and other assets.

Unlike 401(k)s, which are accounts provided by your company, the most common types of IRAs are accounts that you open on your own. Others can be opened by self-employed individuals and small business owners. There are several different types of IRAs, including traditional IRAs, Roth IRAs, SEP IRAs and SIMPLE IRAs.

Tasks to do:


1. Start Right Now

Women tend to wait for that elusive next-get. You may tell yourself that you’ll put money aside once you get a promotion, when you get married, or after you pay off your student loan. But the key to saving for the future is to capitalize on the compound interest that accumulates over long periods of time. And that means the sooner you start, the better, even if you can manage only a small amount at first.

2. Determine Your Financial Goals

You can’t know where you’re going if you don’t know where you are. In order to save properly, you need to do a little math. Experts say you’ll need 70 percent of your annual pre-retirement income—but you should adjust accordingly depending on your goals. If you have “caviar and champagne” dreams, you’ll want 100 percent—or possibly more—of your current salary.

Use a retirement savings calculator like the one at to find out how much you need to save to meet your target. Once you’ve crunched the numbers, set a plan and stick to it. And be sure to revisit periodically to accommodate for changes in your lifestyle and the economy.

3. Contribute to Your 401(k)

If you’re not taking advantage of your company’s 401(k), it’s like turning down a free gift. But according to the Department of Labor, only 45 percent of the working women participate in a retirement plan. A 401(k) allows you to put a percentage of your paycheck into a tax-deferred investment account. This “defined contribution plan,” as its known, is one of the easiest and best ways to grow a sizable nest egg, especially if your company offers a matching plan.

Before jumping ship to take a new job, make sure you read up on your company’s vesting policy: The cash you’ve contributed is yours to take (roll it over into an IRA), but depending on how long you’ve been with your employer, you may be able to collect on only a portion of their share. For example, after two years, you may be entitled to 20 percent of the money your employer contributed, 40 percent after four years, and then after six years, when you are fully vested, you’ll be entitled to 100 percent of their contribution.

Don’t lose those valuable benefits. If you’re itching to move on but you’re only a few months or even a year shy of vesting, it’s worth it to stay put until you can take their money and then run.

4. Open an IRA

Another way to gain valuable tax advantages is to set up an individual retirement account (IRA). This is an ideal choice if your company doesn’t offer a plan or if you’re self-employed; however, those who have a 401(k) can also take advantage of some of the benefits too.

Although you’ll generally be hit with early withdrawal penalties, IRAs, unlike 401(k)s, offer certain exceptions when it comes to educational and medical expenses, or home-buying costs, such as down payments. There are several options to choose from. Consult a financial planner to determine the route you are eligible for based on your economic situation.

Roth IRA: A good bet for your twenties and thirties, this account offers tax-free growth. That means you won’t owe the government when it comes time to cash out in retirement. Plus, there’s more flexibility and opportunities for penalty-free withdrawals (as long as you don’t withdraw any of the interest earned) should you need to dip in for a pre-retirement emergency.

Traditional IRA (deductible): New rules in effect for the Roth allow more people to qualify, but this is another valid alternative if you don’t. Although you get tax-deferred growth (you’ll pay taxes on your gains once you start to withdraw at the required age of 70½), your contributions may be deductible each year based on your financial circumstances.

Traditional IRA (nondeductible): Similar to the above, but your contributions are not tax deductible, making it the least attractive of the bunch. Opt for this only if you don’t qualify for the other two.

5. Don’t dip!

As your nest egg begins to grow, you might be tempted to dip into it to finance that Caribbean cruise or gorgeous new bedroom set. But experts agree: Keep your paws off! When you withdraw from a retirement account, you get hit with a double-whammy. Not only will you pay considerable penalty fees, but for every day that cash is gone, you’re losing out on interest. And that defeats the whole purpose.

Leave your 401(k) and IRAs alone (barring any major life emergencies) and set up a regular savings account for short-term goals like vacations and home renovations. Choose a high-interest bank, money market, or CD that lets you access your money penalty-free at any time, or after a three-, six-, or 12-month period, depending on the account.


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