Are your parents nearing retirement? Do they have a financial plan in place for their sunset years?
Not so long ago, financial planning for retirement was a simple exercise. For most of us, it meant shifting our surplus funds into fixed deposits of banks, or investing in the public provident fund. In fact, investment options were quite limited. The National Pension System did not exist; there were no retirement plans on offer from insurance companies; and investing in equities was generally a no-no for most bread-winners. There was no scheme to reverse-mortgage one's property to banks as an avenue to ensure a steady flow of money.
Not just that - few people bothered to buy individual health insurance for themselves to ensure continued financial protection after the employer's group cover ceased on retirement. The absence of health cover during post-retirement years often caused a severe financial strain on families due to the out-of-pocket expenses on health care during old age. And with a predominantly conservative and fixed-income bias in investments, retirement savings did not work efficiently enough to create either a regular income or a meaningful corpus, and inflation quietly ate into whatever money was left over.
It is a different financial landscape today with a wide array of investment options for retirement planning coming into the market. However, it is often difficult for those of us who spent our working lives in an earlier era when financial literacy was much lower and we did not possess the tools to plan our retirement finances optimally.
As the retirement year comes closer, there may be many questions confronting the family. First, of course, is whether the savings are enough to take care of their expenses in the post-retirement years. With improved health care facilities and growing longevity, this would be the most important question begging to be answered.
Once this is settled, the immediate follow-up is how best to invest the retirement kitty so that there is a steady flow of income that would last the full distance. If there is a health cover, is it adequate? Should equities form part of the investment portfolio during the run-up to retirement and should a portion of the retirement corpus be parked in shares on the expectation of higher returns?
Lending a helping hand in retirement planning may be the least you can do for your parents. You will do no worse than to sit down together and help your parents sort out their retirement finances.
Our cover package seeks to find the answers to all these questions, and some more, including how to help your parents deal with their outstanding debt. Knowing how to tackle all these will be beneficial for you as well, since your parents' retirement, if it is not sufficiently provided for, can have a definite impact on your finances.
SARBAJEET K SEN