WEALTH MANAGEMENT FOR SENIOR CITIZENS – PART- I

[Dr. Sanjiv Agarwal]

With financial planning and wealth management becoming the new buzzwords in the financial market place, banks, broking firms and other financial institutions are increasingly positioning themselves to serve the upwardly-mobile young and middle-aged families, particularly in the urban areas. However, the concept of wealth management and investment planning for senior citizens is yet to fully catch on in the financial market arena. Somewhere in our excitement about this new, new thing, we may have forgotten that the benefits of financial planning apply as much to a senior citizen as anyone else as one should not retire from prosperity.

Changing times require new responses. The world has changed dramatically over the last couple of decades, and so has the financial marketplace, making it that much more imperative for a . senior citizen to manage his or her finances. A senior citizen (say a person reaching the retirement age of 60) may have to consider the following factors:

Due to advances in medicine and better living standards, the average life expectancy has increased significantly. Today, as a senior citizen, the retirement years may account for nearly one-third of your life. In such a scenario, one cannot afford to be lax with his financial needs during the post retirement years.

It is a fact that the traditional Indian joint-family and support systems are breaking down, and nuclear families are increasingly becoming the order of the day. By the time your children and their families move out, it should be ensured that a person is financially independent.

Living standards and cost of living ( prices) are going up significantly as the India growth story plays out. In such a scenario, traditional fixed-income avenues may just not be enough for you to maintain your lifestyle in your golden years post-retirement. Today, based on your risk profile, the financial marketplace is awash with options, both equity and debt, and the right mix of these instruments will help beat inflation and sustain the post retirement years.

Unlike young families who are more focused on spending and consumption, a retiree would have probably built a reasonable amount of assets. If his children have moved out, then his spending levels will decline significantly. He could, for instance, also sell his big house and buy a small one to pocket the difference. Moreover, his retirement would make him a beneficiary for provident fund and pension, among other things. In a nutshell, he needs all the investment advice he can get to plan his finances appropriately.

Last but not least, there are opportunities galore for people today to work beyond 60 and even 70 years of age. As a working senior citizen, one should not only need to look various investment choices to park his regular income but he should also need to avail of tax planning options.

One may well ask why it is imperative to discuss health before investment and what sense would it make if it is suggested to invest in health insurance. There is an old saying- health is wealth and this holds true even now. It is believed that wealth planning for the post retirement years is incomplete without the health cover or insurance, more so given the complicated diseases these days.

Even one major disease or hospitalization can make a big hole in your pocket and this indeed becomes traumatic for the senior citizens whose regular earning years are behind them. It becomes even more worry some in case of self employed persons who may not have benefits of pension or medical facilities from erstwhile employers. It would therefore be desirable to consider an area that has been mostly ignored in our country- health insurance for senior citizens, before we look up at various investment options.

It is an irony that not only are the senior citizens largely uncovered for medical and hospitalisation risks ( which could significantly erode the savings accrued on retirement ), but insurers have also left little on the offer for them. It is also seen that there are few enquiries about such plans due to lack of awareness amongst the potential users of such insurance products.. Today, India has a developed insurance market with many public sector and private- foreign players offering multi products, yet there are few schemes which are targeted at senior citizens and elderly person of 65 years or more age. Most of the health covers can be renewed only upto the age of 70 tears and the upper age of entry is also 60- 65 years. Thus there is a barrier at the entry level itself. Ideally, if you are around 50-60 in age, you can avail number of health care policies including the family floater plans, although these can be renewed upto a specified age of 70 years or in some cases upto 80 years. However, if you take a policy at 65 years or more, insurance companies will cover you only upto 70 years or after 70, there are very few options available for health cover. In such cases , the coverage also becomes limited. Some of the plans are Senior Citizens Red Carpet, Silver Health, Health of Privileged Elderly etc.( Names of insurers not mentioned ).

Our Government has also taken few steps to encourage health insurance plans.. All insurance companies have been advised to introduce mediclaim policies for senior citizens. Income tax provisions allow a deduction of Rs 15,000 from income for the amount paid towards premium of health insurance to cover self, spouse and children. An additional deduction of 15000 ( total Rs 30000 ) is allowed if one covers his or her parents for health insurance. In case the parents are of 65 plus age , the deduction is enhanced by Rs 5000, ie Rs 20000.

As a rule, before one plans out where the retirement benefits should be parked, one should go out and buy a insurance cover.

 

WEALTH MANAGEMENT FOR SENIOR CITIZENS - PART- II

WEALTH MANAGEMENT FOR SENIOR CITIZENS - PART- III