The effort and hard-work our parents put in to raise us up cannot be equalled. Preoccupied with your own life, you as a child may have not understood the emotional and financial hardship they went through in ensuring a smooth and successful life for you. As a child, you may have never contemplated their non-working or retirement years till it neared or are actually setting in. It is difficult to see your parents age and becoming dependent on anyone for anything, especially financially.
While it is possible, your parents have saved enough for their golden years, there are certain unexpected emergencies which may throw them off guard. With you having your own family to tend to and your own share of responsibilities, it may become financially stressful for you to help your parents. Although your parents maintain a dignified silence on their money matters, it would be wise to have a frank conversation with them to have a plan in place and ensure a peaceful life for all. Here is how you can go about it:
Know How Much Money Your Parents Would Need
As the first step, have a hearty conversation to get a rough idea of how much money they would need in retirement. This should include expenses necessary for maintaining their current lifestyle and meeting medical costs that may arise due to age-related issues. While doing so, do factor in the inflation so that they do not get any rude shock about their wealth erosion later. If your parents are great planners, they may have executed a plan to take care of the necessary expenses and medical needs. However, if they have not, help them with a financial plan that can sustain their needs and help them build a nest egg. It is also a common sight to see people working or take up different roles post retirement that helps generate regular income. Check with your parents if they have any such plan so that the income earned can be parked in investment instruments that will help grow their money. If your circumstances allow it, start saving and investing for them to build a corpus they can use.
Ask Them If They Have Saved Enough
A frank conversation will also give you a fair idea about how much they have saved during their working years so far. You can help them with a financial calculator to know if they have saved adequately. In case they haven’t, make them aware about effective investment instrument like equity mutual funds so that part of their saving can be invested to yield higher returns. Also, assess if your financial commitments allow you to allocate some savings for their golden years.
Have They Invested their Money Smartly?
Usually, parents are hesitant about discussing their investment plans with their children, thinking it is not needed. Even if they do, it is your duty to understand their need and help them invest accordingly. While assessing their investment options, ensure the chosen investment instruments help them create wealth while reducing their tax outgo. During their working years, they can invest in the government-backed National Pension Scheme (NPS) to get a regular pension after they retire. The Senior Citizen Savings Scheme (SCSS) and Prime Minister Vaya Vandana Yojna (PMVVY) are apt choices for people above the age of 60 years, who want regular income in retirement. You can also consider investing in mutual funds and fixed deposit to help you parents in their retirement years.
Enhance Their Health Cover
Ageing can make your parents prone to various diseases, treating whom can become a major expense after their retirement. It would be wise to check if they have bought adequate health insurance cover for themselves. If they haven’t, ensure you get them a health insurance plan with maximum coverage to ensure the best medical facilities. You can also buy a health insurance plan for them and can also avail the associated tax saving benefits. Under Section 80D, you can claim a deduction of up to Rs. 25,000 for the health insurance of self, spouse, and dependent children. Additionally, you can claim a deduction of up to Rs. 25,000 for the health insurance plan bought for parents if they are less than 60 years of age, or Rs. 50,000 if they are above the age of 60.
Finally, your parents will always value the time you will invest in them. You can however take this to a higher level by investing for them so that they do not depend on anyone in their golden years. Besides all this, respect the decisions they have made in life so far and extend a helping hand if they want to try something new for a dignified life.
The writer is CEO, BankBazaar.com