Retirement planning is a crucial aspect of financial security for everyone, but it holds particular importance for women. Women often face unique challenges that can impact their retirement readiness. By understanding these challenges and taking proactive steps, women can secure their financial future and enjoy a comfortable retirement.
Experts from The Family Office recently issued a report on the importance of retirement planning for women, the specific challenges they face, and how bespoke investment portfolios can address these issues.
The Family Office in Bahrain, Dubai and its Riyadh-based wealth manager, The Family Office International Investment Company, are regulated by the Central Bank of Bahrain, The Dubai Financial Services Authority and the Capital Market Authority of Saudi Arabia, serving hundreds of families, individuals and investors.
Challenges women face in retirement planning
Women encounter several challenges in their journey toward a secure retirement. These include longer life expectancy, career breaks, and lower lifetime earnings compared to men.
• Longer life expectancy: Women tend to live longer than men, with an average life expectancy of 73.8 years compared to 68.4 years for men. This means women need to plan for a longer retirement period, often requiring a larger retirement fund to maintain their standard of living.
• Career breaks: Many women take career breaks for caregiving responsibilities, such as raising children or caring for elderly family members. These interruptions can lead to fewer years of earnings, reduced pension contributions, and ultimately, a smaller retirement fund.
• Lower lifetime earnings: Despite progress in closing the gender pay gap, women still earn less than men on average. According to the US Bureau of Labor Statistics, women earned 83 cents for every dollar earned by men in 2022. Lower lifetime earnings translate to lower savings and pension contributions, impacting women’s retirement readiness.
Bespoke portfolios: Tailored investments for women
Bespoke investment portfolios can play a significant role in addressing the unique challenges women face in retirement planning. These portfolios are customised to meet individual financial goals, risk tolerance, and investment horizons, offering several advantages:
• Diversification: A well-diversified portfolio spreads investments across various asset classes, managers, and geographies, reducing risk and enhancing potential returns. Diversified portfolios can provide a balanced approach to growth and stability.
• Risk management: Women often have different risk profiles compared to men, with a tendency to be more risk averse. Bespoke portfolios can be tailored to match an individual’s risk tolerance, ensuring that investments align with their comfort level and financial goals.
• Growth potential: Investments in private markets, such as private equity, private credit, and real estate, offer the potential for higher returns compared to traditional public markets. These asset classes can help bridge the gap created by lower lifetime earnings and career breaks, contributing to a more robust retirement fund.
Steps to create a retirement plan
Creating a solid retirement plan involves several practical steps:
1. Assess your financial situation: Begin by evaluating your current financial status. This includes understanding your income, expenses, savings, and investments. Knowing where you stand financially is the first step toward effective retirement planning.
2. Set retirement goals: Define your retirement goals, considering factors like desired retirement age, lifestyle, and any specific needs or aspirations. Having clear goals will help you create a focused and achievable retirement plan.
3. Calculate retirement needs: Estimate the amount of money you will need for retirement. Consider factors such as inflation, healthcare costs, and longer life expectancy. The Family Office’s retirement calculator can provide valuable insights into your future financial needs.
4. Create a savings and investment plan: Develop a savings and investment strategy tailored to your retirement goals. This should include regular contributions to retirement accounts and investments in diversified asset classes. Consider working with a financial advisor to optimise your investment strategy.
5. Monitor and adjust your plan: Regularly review your retirement plan and make adjustments as needed. Life circumstances and financial markets can change, so it’s essential to stay flexible and adapt your plan accordingly.
Expert insights
Starting early and maintaining consistency in retirement planning are essential for securing a stable financial future. Abdulmohsin Al Omran, Founder and CEO of The Family Office, said: “The sooner you start planning for retirement, the more time your investments can grow and compound over time. Regular, strategic contributions can significantly enhance your retirement fund, ensuring financial security and peace of mind.”
Conclusion
Retirement planning is a vital endeavour for women, given their unique challenges and longer life expectancy. By leveraging bespoke investment portfolios, women can address these challenges and secure their financial future.