Your Financial Plan

My dad retires in November 2016 and will live in our own house in Jharkand. My parents’ medical expense is ₹5,000 per month. They have separate health cover for ₹6 lakh with premium of ₹23,000. Both have health issues. How do I manage my parents’ post retirement benefits?

Shekhar

When post retirement expenses overshoot the income, it is always a challenge to bridge the shortfall over the years. The present monthly expenses of ₹25,000 will be ₹1.1 lakh at a 7 per cent inflation rate by the time your father turns 80, whereas the pension will grow at a slower pace. The deficit will widen from ₹1.12 lakh in the first year to ₹4.61 lakh at the age of 80. After clearing the dues of ₹8 lakh, your father will have a retirement corpus of ₹40 lakh when the insurance policy matures in 2019. Deploy the same at 8 per cent post tax return to manage the shortfall till he turns 80. Beyond 80, and if your mother is five years younger than your father, they will be left with no fund to meet the monthly shortfall.

Using the retirement corpus to meet medical cost outside the medical reimbursement will aggravate the situation. They need to look beyond fixed instruments for their investments. Until 70, your father can invest the monthly surplus through a systematic plan in a balanced fund which will earn far higher return than fixed instruments to bridge the shortfall beyond the age of 85. To meet the increased medical cost as they grow older, of the SIP investments they can invest 20 per cent in a pharma fund to protect the retirement corpus. If they are not able to achieve the desired returns, later, they can go for reverse mortgage of the property, to enable them live independently during their lifetime.

The writer is a SEBI-registered investment advisor and founder, myassetsconsolidation.com.

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