One
of the biggest mistakes people make now is failure to set aside money for post
retirement needs. Most of us are not concerned about the life after retirement.
Social Security is no longer a sure bet. This means that most of us have to
rely on ourselves to provide for retirement, if you want to fill your stomach
you have to earn nobody will come and help you. In simple terms saving money to
make your retired life happy is called retirement planning. If you haven't made
an effort to make retirement planning, make it now. A financial planner can
help you in finding a better option for your retirement planning. You can do
your own research also to determine what you need to do now so that you are
secure in your future.
Why should you Plan
for your parents Future
Securing the future of your parent
is your responsibility; we all have to realize this fact. Think for a moment
how much money they have spent for us...! This is the time to give back all
those golden moments that they have gifted to you. They have sacrificed many
things to make you grow to this level. If you are able to read this article
now, there is no doubt they have spent huge money on you. If they wouldn’t have
spent money for your food, health, dress, education etc. now you wouldn’t have
seated in front of system and reading this article. There are thousand things
you can do for your parents. Old age is like childhood during this period they
need care and love, if you can spend a minute with your parents when they are
old, it will be a great happiness for them. There are many factors that disturb
people when they are old such as;
Parent’s Investment on
you
If your parents don’t have money to
fulfill their retirement needs, don’t ever degrade them instead you should
realize the fact why they don’t have money. To mold a kid as a perfect citizen,
his parent has to invest huge amount on him/her. While investing this amount they
will expect “I am investing on my kind, in future whenever I need money my kid
will take care of me” 80% of the parent will have this expectation, now it is
our responsibility to take care of our parents. Following are some of the
spending they have done for you;
Needs to be fulfilled
Basically there are three kinds of
need to be fulfilled such as;
Financial Needs
Nothing is possible without money, leading
a life without sufficient money will kill the mental health of people. When our
parents are old it is our responsibility to provide them enough money to take
care of their small needs.
Medical Needs
Old age is the time during that all
kinds of health problems will follow us. During this time we need to spend huge
amount of money on our parent’s health like how they have done we were small.
Taking a health insurance plan on your parents name will help you to find a
simple solution for this problem.
Moral Needs
Moral support is the most important
thing that we have to provide for our parents when they are old. It will help
them to be mentally stronger. Moral support can avoid many problems such as
depression, ill health, etc.
How can you plan for
your Parent’s future?
There are many ways to do retirement
planning. Following are some of the major ways in which you can plan your
parent’s future.
·
Reverse Mortgage
·
Health Insurance
·
Pension Plans (ULIPs)
·
Immediate Annuity
·
Annuity
Reverse Mortgage
Reverse Mortgage can be well defined
as “a scheme under which a bank or financial institution permits the owner of a
house to leverage the future value of the asset into a steady source of
income”. Reverse Mortgage allows elderly people to have a steady stream of
income by mortgaging self occupied property to banks or eligible financial
institutions while continuing to live in and hold the title of the house till
he is alive or sells the house or moves out.
In this case it is completely
parents’ desire whether to go for reverse mortgage or not. But being their
children we can do something for them. Normally parents will write their
property in their children’s name even if they don’t have enough money to lead
a peaceful life. Instead of making advantage of this situation we can advise
them to go for Reverse mortgage, later if you want to retain the house you can
pay back the money to bank and do it.
Health Insurance
Health care costs are high and
getting higher day by day. As the age of an individual increases the health
care costs increase manifold and become a burden on the individual. Senior
citizens have to pay out of their hard earned savings to meet the expenses.
Health Insurance Plans protects old age people in case they need expensive
medical care. You get cashless benefit or medical reimbursement for
hospitalization expenses due to illness or accidents.
It is our responsibility to take
care of our parents’ health when they are old. But it is very difficult to
manage this situation without proper financial planning because you might need
huge money to take care of their health. Health Insurance is a better solution
to overcome this scenario, it will take care of your parents health related
expenses all you have to do is buy onehealth insurance plan and pay the small
premium.
Pension Plans (ULIPs)
The first point to note is that
there is no insurance in an ULPP, though the product is offered by insurers.
Even if an insurer offers insurance cover bundled with pension, such a product
is best avoided. Insurance is best taken independently from pension planning,
through what are called term insurance plans. ULPP is very much an investment
product, competing on costs, benefits and returns with Mutual Funds, deposits,
share portfolios, and so on. In the accumulation phase, the amounts invested go
towards purchase of units, at prevailing market rates. At retirement, the
policyholder is provided with a certain portion of the accumulated fund as a
lump sum payment. The remaining amount is used to purchase an Annuity scheme to
provide regular monthly income post retirement.
Immediate Annuity
Immediate Annuity is aregular income
stream purchased with a lump sum investment, where the income stream starts
immediately after the purchase. Immediate Annuities are usually provided by a
life insurance companies. The major difference between “immediate annuity” and
“annuity” is that in immediate annuity you have to make a lump sum investment
and you will start receiving the annuity immediately after purchasing it but in
“annuity” you will start receiving amount only after a pre-determined period.
Annuity
An annuity is an investment that you
make, either in a lump sum amount or through installments paid over a certain
number of years, in return you will receive back a specific sum every year,
every half-year or every month, either for life time or for a certain number of
years. After the fixed period of annuity payments expires, the invested annuity
fund is refunded, possibly with a small addition, calculated at that time.
Annuities differ from all the other
forms of life insurance discussed so far in one basic way - an annuity does not
provide any life insurance cover instead, offers a guaranteed income after your
retirement. Usually annuities are meant to generate income during one’s life
after retirement that is why they are also called pension plans. Annuity
premiums and payments are fixed with reference to the duration of human life.
Types of Annuities
There are four major kinds of
annuities such as;
·
Life Annuity with purchase
Price
·
Life Annuity without
purchase Price
·
Joint Life Annuity with
purchase Price
·
Joint Life Annuity without
purchase Price
·
Life annuity guaranteed
for 5, 10 & 15 years
Life Annuity with purchase
Price
In this kind of annuities the person
receives annuities for as long as he/she lives and his/her nominee receives the
purchase price of the policy after demise. The purchase price refers to the
value of your investment corpus at the end of the accumulation phase (it is the
amount with which the annuity was purchased).
Life Annuity without
purchase Price
In Life Annuity without purchase
Price the person receives annuities for as long as he/she lives his/her nominee
won’t receives anything after his/her demise.
Joint Life Annuity with purchase
Price
In Joint Life Annuity with purchase
Price both you and your spouse will receive annuities for life. After his/her
demise the purchase price will be returned to the nominee.
Joint Life Annuity without
purchase Price
In Joint Life Annuity with purchase
Price both you and your spouse will receive annuities for life. After the death
of concerned person nothing will be returned to the nominee.
Life annuity guaranteed
for 5, 10 & 15 years
In this type of annuities you receive annuities for a minimum term i.e. 5, 10 or 15 years. Annuities continue for life thereafter. If death occurs before the end of the pre-determined term, the company will pay the annuity till the end of that term to his/her nominee.