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How to Plan for Medical Expenses during Retirement?

dateKnowledge Centre Team dateApril 29, 2021 views321 Views
How to Plan for Medical Expenses during Retirement?

Growing old is not something we look forward to. However, it is inevitable. Even though retirement is considered to be a time when we can enjoy all the savings we have accumulated throughout our career, the prospect of leisure can be disrupted by health issues and medical expenses that plague human beings in their old age. You should plan for retirement when you get married to protect your spouse from the uncertainties of life.

Treatments and surgeries for ailments that develop from old age, like cataracts, heart/kidney issues, etc., can range anywhere from Rs. 8,000 to Rs. 1,80,000. This is why it is essential that we plan out and save some money for such expenses after our earning period is over. Proper retirement planning in India is essential to prepare for the worst-case scenarios once you are old.

How much should you for Contingency Expenses during your Retirement

Planning out your retirement budget will depend on your income after your career and a rough estimate of how much you would spend on a monthly basis. While this sounds simple enough, many adults find themselves unprepared and terrified when the reality of old age hits them, especially if they did not purchase a retirement plan when the time was right.

You have several options to choose from when it comes to a pension plan/retirement plan, and government employees and many semi-government offices provide pensions that can cover day to day expenses of the retirees.

But this small sum may prove to be insufficient in the case of a medical emergency, which is why it is pivotal that you include contingency expenses in your retirement budget. A lot of thought should go into the calculation of this amount, including your lifestyle, any genetic diseases you may develop, as well as any pre-existing health conditions that your doctors have warned you about.

The healthier you are and have been, the less money you need to dedicate for contingency and health care expenses. At the same time, however, a healthier way of life also means you will live longer - you will need to plan for a longer life expectancy, which would increase the sum total of the contingency budget.

Are there any Alternatives to Health Insurance Plan for Managing Medical Expenses?

Another mistake most people make when planning out their retirement is putting too much faith in their health insurance. Most health insurance plans do not cover long-term care and will only allow limited healthcare spending after retirement. As one grows older, one may start developing age-related disorders that require daily medication but do not require hospitalization.

Because so many health insurance policies are designed to cover emergency hospitalization or surgical requirements, they usually require additional payments and drivers to cover the costs of regular prescription drugs and medication, which is what the elderly usually need coverage for.

Old age also comes with the gradual deterioration of many organ systems in the body, such as the eye or the buccal cavity. People who develop disorders like cataracts or face dental issues are distraught to find that health insurance policies may not cover these expenses - your contingency plan must take into account such possibilities so that you need not pay these expenses on an impromptu basis.

It is also a good idea to investigate the history of your family so that you can be prepared for any genetically driven disorders you may develop later in life. For instance, if your family has a history of having bad dental health, you can purchase a stand-alone dental insurance plan that covers expenses for root canals, tooth replacements, etc.

Starting a fixed-deposit savings account where you save money just for your future health care expenses is also a good idea. But one of the best ways to work your way around these loopholes that exist in health insurance policies is to invest in a good quality retirement plan that guarantees enough monthly income to prepare you for any healthcare contingencies that may come your way.

Insurance Plans to Safeguard your Retirement Plan

Canara HSBC Oriental Bank of Commerce Life Insurance has recognized the necessity for a reliable and affordable retirement and pension plan in India. They have various insurance policies that can help you prepare yourself for any unprecedented events:

1. Invest 4G Plan

This highly flexible retirement plan is customizable according to your financial goals and future requirements. Here are a few benefits customers enjoy when they purchase this Unit-Linked Insurance Plan:

  • Guaranteed regular income so that you can be completely self-sufficient in the face of adversity.
  • Life insurance coverage that protects any and all dependents in case of your unfortunate demise.
  • Flexibility to manage and control your savings according to your preference, choosing from eight different unit-linked funds.
  • Receive fund value as a lump sum or as periodic settlements upon reaching maturity.
  • Reduction in Premium after the first five completed years of policy premium payment.
  • Return of mortality charge added to the fund value upon reaching the date of maturity.
  • Milestone Withdrawal Option and Systematic Withdrawal Option so that you can liquidate your savings after a certain number of policy years have been completed.
  • Tax benefits based on the prevailing income tax laws.

2. Pension4Life

Pension4Life Plan help senior citizens plan for a safe and comfortable retirement without depending on anyone else. This pension plan offers a regular stream of income after your working years are over, with a defined annual installment in exchange for a fixed purchase price.

The product offers seven different options for an annuity, with a special option for Family Income for subscribers of the National Pension System. There are several benefits to this plan, some of which include:

  • The death benefit can cover the costs your family may need after your death.
  • A loan facility under one of the annuity options
  • A higher annuity installment if the policyholder can pay a higher purchase price.

It is essential for any working citizen to begin preparations for their retirements at an age where they are earning, and a reliable retirement and pension plan in India is an important component of a financially independent individual’s financial portfolio.

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Frequently Asked Questions (FAQs) for Retirement and Pension Plans

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the Premium calculator available in the ‘Tools and Calculator’ section of

The Invest 4G plan offers three benefit options to choose from. If you have opted for the Life Option or Whole Life Option, the insurer will pay the nominee(s) death benefit if the policyholder meets with an unfortunate incident. However, in the Life Option with Premium Funding, the policy continues even after the death of the policyholder. The company pays the remaining premiums until the policy matures.

Life is unpredictable and so it is important to prepare for all eventualities. If you regularly save a substantial amount of your income for retirement, the corpus may expand to a comfortable level before retirement. In case you become disabled and are unable to contribute to the retirement plans, most plans will continue to multiply your savings. The amount already accumulated will continue to grow and besides the existing plans you can also choose to invest in pension schemes specifically designed for people with disability.

Investment in ULIPs like Invest 4G plan qualifies for tax deductions under section 80C of the income tax law. The maturity benefits of ULIPs are also tax-exempt under section 10 (10D) of the Income Tax Act, 1961. However, if the premium paid during the policy term is more than 10% of the sum assured, the maturity proceeds will be taxable.

The concept of early retirement is catching up fast in India, but there are no specified ages for early retirement. While in some western countries the age between 35 and 45 is considered favourable for early retirement, in India the ideal age is 45-50 years. With the right planning and investments, it is not very difficult to retire early.

At the age of 35-40, people generally have several responsibilities such as children’s education and various EMIs. It is difficult to spare a substantial amount of income for retirement. Depending upon the needs of the household and the lifestyle, one should aim to save around 40-50% of his/her income. Around 10% of the income should exclusively be allocated for retirement planning. Here are some tips to choose the best retirement plan.

  • Focus on your needs: It is easier to formulate a strategy when the goal is clear. Make an estimate of the amount required to sustain your life. Take inflation into account and zero in on the targeted corpus.
  • Research thoroughly: Conduct thorough research before investing in any financial product. Read the term and conditions properly and try to understand how an investment product fits your needs.
  • Consider different products: The market is awash with all kinds of investment products. Do not follow conventional advice as the need of every person is different. Take into consideration all the suitable products, conduct an objective analysis and then invest.

Owning a house is a cherished dream for many. There are several ways to save for a new house, but in urgent cases, people may be tempted to withdraw from their retirement fund. There are various financial products for retirement planning, and all have different withdrawal rules. In the case of the National Pension Scheme, partial withdrawals for special purposes like buying a house are allowed only thrice during the policy tenure. However, to avail the withdrawal facility, you should be an NPS investor for at least 10 years and you are permitted to withdraw only 25% of your contribution. If you have a PPF account, you can withdraw 50% of the accumulated amount, but only after staying invested for at least 6 years. The Invest 4G plan also allows partial withdrawals after five years of investment.

The quantum of monthly savings depends on the specific needs of the buyer. Financial advisors, however, suggest people save around 15% of the monthly income for retirement.

Retirement plans such as NPS have a very low entry threshold. It is also open to all and anyone can open an NPS account and start saving. A small business can also invest in Invest 4G plan from Canara HSBC Oriental Bank of Commerce for as low as Rs 5000 every month.

The choice between paying off a student loan or start a retirement account is not a difficult one. Starting early for retirement planning has its own advantages but extending the student loan will increase the interest burden. You will have to find a balance between the two. Try to pay off the student loan as soon as possible, but do not hold back on investing in a retirement account.

Most people nominate their spouse to receive retirement benefits in their absence. But a spouse is not automatically entitled to be the beneficiary of a retirement account owned by the other spouse.

Gold is a safe investment asset and investors often flock to the yellow metal to stabilise their portfolios. Holding a small quantity of gold can be considered as the intrinsic value of gold remains intact. You can also choose to have an exposure to gold through ULIPs. ULIP funds invest in a variety of asset classes and some fund options also have a small exposure to gold. You can choose fund options with gold to have a small and indirect investment in gold.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

The government has allowed all central government pensioners to open a joint account with their spouses.

Vesting date or age signifies when your pension plan’s accumulation phase is over and the distribution phase can begin. For example, in a deferred annuity plan, you may have a vesting date which is 10 to 30 years away depending on your age at entry. You will continue to invest or stay invested till the vesting date. After the vesting date or age, you can start receiving the pension or withdraw the money from the plan.

The steps may differ from plan to plan. However, you can buy the online retirement plans following the steps below:

  • Retirement Calculator: Use a retirement calculator to estimate your corpus need and expected monthly investment amount to achieve it
  • Choose Plan: Select the online retirement plan you want to start investing in
  • Contact Information: Fill in the personal details including the contact information. Make sure to put the correct e-mail ID which you can access since all future communication about the policy will take place via e-mail.
  • Define Your Investment: Select the goal, investment term, investment frequency and amount you want to invest (based on the calculator estimate)
  • Select Fund Allocation: Online retirement plans give you the option to invest in multiple assets including equity funds. You can select the ratio in which your premium will be allocated to these funds as per your risk appetite. Then select one of the portfolio rebalancing strategies.
  • Select Withdrawal Plan: You can withdraw money based on set milestone or systematically from the plan after the lock-in period. Select the options for withdrawal as per your plan.
  • Review Plan & Investment Details & Complete the Application Form

You can pay the premium amount before or after completing the application form to start investing.

The best time to plan your retirement is when you are planning your career. However, this may not be the time when you really start investing money for your retirement. You must start investing in your retirement plan as soon as you start earning.

Retirement is the only financial goal you cannot repair with other means of funding like a loan. Thus, developing the habit of investing with every income you have is the best way to have a comfortable retired life.

Insurance allows your family, especially your dependent spouse to continue living without financial worries if anything happens to you. Also, insurance may help you save enough for retirement in case of permanent disabilities. Additionally, life insurance retirement plans allow you to build a good retirement corpus with bonus additions.

Yes, you can change the nominee of the policy anytime you need. If you are using an Electronic Insurance Account (EIA) to manage your policies, you can change the nominees anytime from this account. Otherwise, you can contact the customer care to update the nominations on your policy.

You can opt for auto-debit of the premiums from your savings account. You can also pay the premiums online using your debit card, credit card or a payment wallet.

You can get Rs. 1 Core pension plan using the online retirement calculator. The calculator will assess your eligibility and provide you with the probable monthly or annual investment to achieve the goal. If the amount seems feasible you can complete the purchase online or set an appointment for a qualified advisor to help you in the process.

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