Senior Citizens: Stay Financially Young

Financial advisors are often heard exhorting individuals to `start young`. However, financial planning itself is a never-ending process; even post retirement one needs to continue to strive to sustain monthly expenses without eroding capital.

Financial planning during one`s golden years differs from financial planning earlier in life. To help senior citizens achieve financial goals, their unique needs must be taken into careful consideration. Here are a few pointers on how one should plan finances for the years ahead.

Capital protection-your main priority

To start with, the risk profile should be held at ``Low-Moderate`` with an essential bias towards low. Given this aspect, there arises the need to hold a major part of investments in safe avenues.

Most senior citizens will have savings to supplement any pension and social security income. Senior citizens generally also have a shorter investment time horizon than younger people. This gives them less time to make up any financial losses. A senior citizen who loses much of his savings may find it difficult to maintain a healthy lifestyle. Equity holding at this point should therefore categorically be lower than 25%, to ensure that capital is protected appropriately. The amount so set aside should be used to take that extra bit of risk for optimization of returns.

Medical cover-health continues to be your wealth

At this age health starts to dwindle and it is time when one is probably seeing the doctor more often friends. Health cover is increasingly important as we age. Long-term illnesses that may incur huge costs are more common in the elderly than in younger people. Health care access is therefore essential. Availing a fresh health cover at this age may not be possible; most health insurers do not provide coverage beyond 65 years. You should as an alternate plan to build a sizeable corpus to ensure that contingencies / medical emergencies are taken care of. This contingency should be planned during the earning years` effectively by setting aside 5% -10% of net earnings. This can be invested in investment avenues such as equity mutual funds to begin with and should be moved into debt mutual funds as one approaches retirement and the possibility of utilization of these funds becomes more likely.

Liabilities-get rid of them!

Having burdens in the form of loan liability / EMI etc, could be detrimental for the post-retirement days. You will not only be required to plan for monthly expenses but would also be required to plan for payment towards liabilities. This could eat into your capital and create stress in later years. If it becomes absolutely inevitable and you are required to plan for any liability, it is best to include that during the planning phase itself.

Planning for your dependents

Estate planning is often ignored in India, nobody wants to foresee the most certain event of life `Death`. Make a will that designates who gets what upon your death. If you don`t have one, the state will make one for you by giving two thirds of your assets to your spouse and dividing the remainder between any surviving children. Your spouse may be dependent on you for fiscal survival. During one`s earning years, consider purchasing a life insurance policy/ pension policy and designating him/ her as the beneficiary.

Hope this brief sets you on the right track to plan your later years and enables you to stay fiscally healthy!

Tips for the week:

· Capital protection is priority; Equity holding should be minimal. Invest in Bank FD, FMP and bonds etc.

· Keep the overall risk profile `Low- Moderate` with a bias towards instruments with lower risk.

· Plan for contingencies/ emergencies, during your working years`. Plan for your health emergencies by availing a medical insurance that will offer cover for life.

· Ensure that your liabilities are taken care of appropriately-try to close them prior to retirement itself.

· Avail pension plans/ life insurance policies and make your dependent spouse as the beneficiary.

·  Create a will and designate who gets what upon your death.