Financial Planning tips for people nearing retirement and having health concerns

When you are young, you have more time to plan your retirement. But as you age and are nearing your retirement, you are left with little time to plan and must make the right decision to ensure a sufficient financial cushion for a happy post-retirement life. Among other things, you should consider health issues and expenses when planning your retirement.

In this article, we discuss the best way to plan retirement for people who are about to retire in the next couple of years or so and may be concerned about health issues.

How to plan your retirement when you are nearing retirement

Retirement planning is about calculating the estimated amount you'd need after retirement in order to comfortably live your post-retirement years and making proper plans, including investments and savings, based on your risk appetite to accumulate that amount.

Based on your risk appetite and target amount, you can diversify your investments across equity, debt, FDs, etc.

As you near retirement, your ability to take risks will decrease, and so you would want to keep a large portion of your investments in low-risk debt funds and fixed deposits, where your money stays safe over time. As per experts, it is wise to start shifting your equity investments to safer debt investments by around three to four years before you are planning to retire. Also, you must put your retirement money in options that offer ample liquidity so you get seamless access to funds post-retirement.

As a first step, estimating your after-retirement expenses is extremely crucial. You do not want to overspend but still want to have enough money to lead a comfortable life after you retire. You should also consider after-tax returns from your investments when planning for retirement.

Another thing that people nearing retirement wonder often is about the best place to put their retirement money. Well, you want easy access to funds, but at the same time, should expect the corpus to pay at least as much returns as the rate of inflation, so that the value of your corpus doesn't decrease a lot over time. Choose options with minimal risk.

Most people in India choose to invest their retirement corpus (lump sum) in a safe and reliable annuity plan, preferably with a life insurer, which will pay monthly or yearly payouts as opted by the investor. The annuity plans will generally have a payout period equal to the remaining life of the investor, which means you'll keep receiving monthly/yearly payouts as long as you live.

Planning for health issues after retirement

As you age, health issues will increase and you'd probably need to visit the doctor more often than you'd at a younger age. So, make sure to consider health-related expenses when planning your retirement. The best way to go about it is to invest in a proper health insurance plan. For people nearing their retirements, a senior citizen health insurance plan is ideal. The plan gives you all-around protection against common diseases and might also cover your routine doctor visits, check-ups and medical bills.

For senior citizens having existing health issues, a senior citizen health plan would either have a co-payment clause requiring the patient to bear a part of the medical expenses or a waiting period of 2-4 years only for existing diseases.

When purchasing a health insurance plan for retirement, you must carefully check and compare the features of different products and choose a plan that best fits your particular needs. For example, some plans may not cover pre-hospitalisation expenses. Others may not offer cashless treatment where the patient would initially need to pay for expenses and be reimbursed later by the insurer.

Conclusion

As one approaches their retirement, their risk-taking ability decreases and so it is crucial to carefully plan and invest in retirement plans that are both safe and liquid. Based on your risk appetite, you can invest in debt, FDs, equity and other options. Make sure to have sufficient health insurance to deal with any expected and unexpected health issues post-retirement. In addition, try to cut your debt (loans, etc.) as much as possible before you retire.

(Article is authored by Mr. Amit Gupta, MD, SAG Infotech)