Homemakers play a critical role in retirement savings, and as such, they must be equipped with the correct information to make informed decisions. According to a study by the Agewell Foundation 2024, around 71 per cent of older women depend on others for their needs and around 51 per cent face financial adversities. Another report by OECD’s International Network on Financial Education (INFE) highlights that women lack financial knowledge and have lower access to formal financial products. It all necessitates developing financial knowledge in women so they can live dignified lives in old age through retirement planning.

Retirement Planning For Homemakers

Vivek S.G., a certified financial planner and founder of Wealth Crafts, a Sebi-registered investment advisor, says: “While they may not have traditional income, their contributions to the household are invaluable and should be recognised in their retirement planning.”

Kavita Bothra, Partner, Primassure LLP, says, “Homemakers, particularly women, need dedicated retirement planning to secure their future and preserve their autonomy.”

She points out that women are paid less than their male counterparts, and their longer life expectancy makes them more vulnerable to financial uncertainties. For example, she says, “If a man earns Rs 100,000 a month and saves 10 per cent for retirement, starting at 35, his savings could grow to Rs 1.25 crore by 60 with a 10 per cent return. Now, consider a woman earning 25 per cent less, so she earns Rs 75,000 monthly. If she saves 10 per cent starting at the same age, her savings may reach Rs 93.3 lakh by 60. That’s 25 per cent less than the man’s savings, even though they started simultaneously, just with different amounts.”

So, how should homemakers plan for retirement, considering their longer life expectancy and factors like unequal income, etc.? When a homemaker is financially illiterate, it can derail the entire household finances in the event of the sudden or untimely death of the breadwinner.

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Says Bothra, “A stay-at-home spouse is one of the hardest jobs in the world, and it doesn’t come with a paycheck. It means not only foregoing a salary but also missing out on opportunities to save for retirement. This has become increasingly relevant as the number of mothers choosing to stay at home has risen to 29 per cent, a 6 per cent increase from 1999.”

Hence, she says, “Retirement planning for homemakers may involve strategies to utilise the working spouse’s income effectively, such as contributing to spousal retirement accounts or jointly investing in income-generating assets.”

The planning should be as per the individual’s need, irrespective of whether they are an earning member or a homemaker in the family. While the basic tenets of retirement planning remain the same for all, starting with budgeting, saving, investing, risk cover through life and health insurance, setting aside emergency funds, building a corpus for a cash flow, and estate planning, the way it is done could be different for a homemaker.

Vivek opines, “Homemakers may need to be more proactive in maximising contributions to retirement accounts, such as PPF, to ensure financial security. They should also consider factors like the potential impact of caregiving responsibilities on retirement finances. Overall, while the strategies may vary, the goal of achieving financial security in retirement remains the same for both homemakers and working individuals.”

While retirement planning includes saving, investing, and building a corpus, how is this possible for a non-earning person?

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What Can Homemakers Do?

Vivek opines, “Homemakers may need to be more proactive in maximising contributions to retirement accounts, such as PPF, to ensure financial security. They should also consider factors like the potential impact of caregiving responsibilities on retirement finances. Overall, while the strategies may vary, the goal of achieving financial security in retirement remains the same for both homemakers and working individuals.” While retirement planning includes saving, investing, and building a corpus, how is this possible for a non-earning person?

Improve Financial Knowledge: Financial knowledge is crucial for all. Homemakers can develop financial knowledge by reading, listening, or watching relevant resources. They can also participate in family financial matters to learn. The primary income earner in the family can plan things with their spouse after discussing different priorities.

Save More: As a homemaker, one has little income flexibility, so they can focus more on saving. “Working individuals may have more disposable income to allocate towards retirement savings, while homemakers may need to focus on maximising savings from other household sources”, shares Bothra.

Utilise Social Security Schemes: There are different retirement-focused saving schemes, such as the national pension system (NPS), public provident fund (PPF), pension scheme, etc., which do not need an investor to be an earning individual. They can start learning by understanding their bank account and then compare other accounts, especially those providing social security.

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Get Insurance And Save For Emergency: Retirement planning is incomplete without risk coverage. So, get life and health insurance for the family to cover any unexpected risk. Further, keep aside a certain amount for contingencies.

“Establish an emergency fund to cover unexpected expenses, such as medical bills or home repairs. Aim to save at least 6-12 months’ worth of living expenses in a liquid, accessible account”, suggests Vivek.

Establish Joint Accounts: Bothra says, “Homemakers should urge their spouses to establish joint bank accounts and investments. Joint ownership ensures equal access to financial resources and facilitates collaborative financial planning.”

Estate Planning: Estate planning is one of the neglected parts of planning, but it is essential to plan to pass on the assets after death to loved ones while staying financially independent during their lifetime. As a homemaker, one may not know and even feel no need for estate planning, but this is important to discuss with the spouse to ensure dignified golden years.

While salaried people get retirement benefits from employers, such as NPS, Employees’ Provident Fund, etc., they may make the homemaker in the family their nominee or the beneficiary in different investment schemes. On the other hand, homemakers should start participating in the financial decision-making process for a peaceful old age.