For years, your parents took care of your physical, emotional and financial wellbeing, often putting your needs ahead of theirs. Like most people of their generation, they might have a savings plan in place. But again, like most of their contemporaries, their plan might not give them enough to live in retirement.
Though most parents regard their children as their retirement plans, the children get married or settle abroad, and are not always able to take care of them. According to a recent MetLife India insurance survey, 80% of Indians don’t plan for their retirement apart from the mandatory government schemes. If your parents fall in this category, you can help them create a retirement corpus that will allow them to remain independent without compromising on their lifestyle.
“It’s very important for you to broach the subject. Most parents do not want to share their concerns with their children. But it is only through talking that one can know their plans and help bridge any shortfall in their retirement corpus,” says Kartik Varma, co-founder, i-Trust, a financial planning firm.
We spoke to financial planners and retirement experts and found that there are a few spheres where parents need the most assistance.
 He recently bought a health insurance policy for his 60-year-old father. He pays an annual premium of nearly Rs 10,000 for this policy. “With age, failing health is an issue. So I bought my dad a health plan. I am looking at more options too.” |
"Inflation can eat into a retirement corpus. Investing in index funds can take care of this." |
Healthcare: Indians are hugely underinsured and most have no health insurance. Rising healthcare costs can eat into your parents’ savings. The good news is that you can buy your parents a health insurance policy and pay the annual premiums. “Buying health insurance for your parents is a very viable option. Though the premium for the parents would be higher as they are in the older age bracket, it makes sense to go for it in order to offset a bigger outlay by them in the future,” says Veer Sardesai, a Pune-based financial planner.
Several insurance companies offer health plans for people between 55 and 60 years. For instance, Star Health Insurance offers a Medi Classic policy for senior citizens. The annual premium for a Rs 5 lakh cover for a 56-year-old male is around Rs 14,000. Accommodation: “Instead of buying a tworoom flat, a child can buy a bigger house and get his parents to move in with him. Parents will thus save on rent and other outlays,” says Sardesai.
If staying with your parents is not a viable option, you could consider other possibilities, including buying them an apartment at a retirement resort. Premlata Dhingra, 67, a resident of Ashiana Utsav, a retirement complex at Bhiwadi in Rajasthan, moved there on the advice of her children. “We have been living here for a year now. The idea to move to Bhiwadi was given by our daughters who live abroad,” she says.
Investments: Inflation erodes the purchasing power. It’s a fact everyone acknowledges but few take into account when planning. This leads to a shortfall, which you might need to bridge. According to financial planners, keeping aside a sum as an SIP every month can take care of this. Even putting away around Rs 6,500 from your monthly income in an SIP of a low-cost index fund that yields an annualised return of 15% will help you save close to Rs 5 lakh in five years.
The retirement years are your parents’ golden years and you can ensure that they enjoy it as much as you did your childhood.
Myth: I can’t help my parents financially because I’m not earning yet. Fact: Even if you can’t add to their retirement nest egg, you can make sure that your parents don’t withdraw from the corpus to fund your higher education. You can take a loan for that. Most banks in India provide 90% of the total cost of the course, which is 6-10 times your parents’ salary. | |
HOW MUCH DO THEY NEED? Even if you are not able to create the entire retirement corpus that your parents need, you can take care of some regular expenses. | |
| Parents with no savings | Parents with some savings |
50 Current age 60 Expected age at retirement 10 Years left for retirement 80 Life expectancy 20 Years after retirement Rs 15,00,000 Current annual expenses Rs 23,60,581 Annual expenses at retirement age Rs 3,97,60,222 Retirement corpus Rs 1,72,841 Monthly savings needed to reach corpus How to bridge it • Invest at least Rs 6,500 from your monthly | 50 Current age 60 Expected age at retirement 10 Years left for retirement 80 Life expectancy 20 Years after retirement Rs 15,00,000 Current annual expenses Rs 23,60,581 Annual expenses at retirement age Rs 3,97,60,222 Retirement corpus Rs 2,00,00,000 Current corpus Rs 85,900 Monthly savings needed to bridge shortfall • Take care of their house EMIs or pay the rent. |
