Life truly comes full circle with age. It starts with our parents taking care of us as children and slowly moves to us taking care of our parents in their old age. Taking care doesn’t mean only looking after their health but also their finances.

Unfortunately, as per the India Retirement Index Study (IRIS) conducted by Kantar for Max Life Insurance Company, about 80% of urban Indians fear they will run out of money in retirement. 

Moreover, this retirement index, which shows our retirement preparedness, also displays a sad state of affairs. We currently stand at 47 out of 100 which is extremely low.

Therefore, it becomes our responsibility to ensure they do not have to worry about anything post-retirement.

Get A Health Insurance for Your Parents

You should get a separate senior citizen policy for your parents even if they are already covered by your employer’s health plan or a floater health insurance. 

Although these plans are more expensive, they have several advantages that may be useful for your parents in the future. For instance, they have shorter waiting periods for pre-existing conditions.

However, there may be a co-payment requirement which isn’t necessarily a bad option for senior citizen policies.

It is also advisable to start a contingency fund for their healthcare because your insurance might not cover everything. You can keep it in a small bank finance FD or a liquid fund.

Now, if you think your current savings or standard health insurance will be enough, check this out:

Also Read: Health Insurance Plans for Senior Citizens in India: Full List

Build a Financial Plan for Your Parents’ Future

To build a financial plan for your parents’ future, you need to ask three important questions to your parents:

1. Do they have any debts?

2. How much retirement corpus do they have, if any?

3. Are they enrolled in any pension schemes?

This will help you understand how much money they actually need.

Now, if your parents live with you, you probably don’t have to consider factors like a cook, housemaid, groceries, rent, and utility bills because you will be paying for them regardless.

Once you have decided on the amount of money, start building a portfolio with an asset allocation of 20-30% in liquid funds to meet immediate emergency needs and income for 12-18 months; other debt investments to form the larger part of the portfolio; and a 20-30% exposure to equity to beat inflation.

Once you have sorted the financial plan for your parents’ future, use the equity glide path method to prevent risks and maximise your returns.

Also Read: PPF Vs EPF: Which is better?

Use the Equity Glide Path Method

Here’s how it works:

Let’s say the current age of your parents is 52 and as of now you are invested 70% in debt and 30% in equity. 

As your parents near their retirement, start shifting 3% from debt to equity every year.

At this rate, once your parents reach 65-70, you will have built enough corpus to help your parents live the rest of their lives in peace. 

Conclusion

Overall, it’s important to build a financial plan for your parents’ future. The best practice is to sit down with them once a year and review their investments and financial situation in general.

There are plenty of government policies out there which provide decent tax benefits and fixed returns to older citizens, hence one should look into those as well.

Disclaimer: The above content is for informational purposes only. You should consult a SEBI-registered Investment Advisor before finalizing your financial planning.