Planning for retirement in 2015? Make your plans now

Planning for retirement
Planning for retirement is important for every individual’s finances. In fact, it counts as a responsibility the individual owes to himself and his family.

When is the right time to retire?

For a majority of Indians, used to working as salaried employees, the retirement age is fixed, so to speak.

Most companies retire their employees by 60 years or thereabouts; some even earlier than that by offering them the golden handshake.

Individuals could of course chart a different course altogether. They may like being busy and could work past retirement in a part-time job or conversely they may decide to retire earlier if they believe they have saved enough money to achieve financial independence post-retirement.

So there is no fixed retirement age – what is important is that the individual has adequate money to meet his post-retirement obligations.

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Post-retirement income

Individuals looking for steady income, post-retirement can consider taking an annuity.

This involves making a lumpsum investment in the annuity plan, which then makes payment to the individual on a future date or a series of dates.

The income payout is determined by a number of factors, including the tenure of the annuity.

The income depends on whether he has opted for a guaranteed payout (fixed annuity) or a payout stream determined by the performance of the annuity’s underlying investments (variable annuity).

The individual can opt to receive the income payments for the rest of his life or for a fixed period of time.

Provision for medical expenses

Medical treatment, particularly for serious conditions are no longer affordable for a majority of individuals.

And when you have retired, there is no regular income to fall back on. This makes the task of managing medical emergencies all the more painful.

Take cardiovascular ailments for instance. Treating a heart ailment, especially if it involves surgery, can be expensive.Unfortunately, most individuals aren’t prepared for such an event.

Cost of a heart surgery in India could vary in the region of Rs 1.5 lakhs to Rs 3 lakhs. Five years later it could be a lot more expensive at over Rs 3 lakhs and at over Rs 8 lakhs after ten years, assuming 10% rise in annual cost.

If the individual hasn’t saved enough money, he would have no option other than to dip into his savings and investments or borrow money as a last resort.

One way to provide for medical emergencies is by taking a health plan from an insurance company. Health plans offer a lot of flexibility both in terms of coverage and disbursal.

For instance, certain health plans cover as many as 30 critical illnesses and over 80 surgical procedures.

Payment towards illness/surgery is disbursed regardless of actual medical expenses. The policy continues even after the benefit payment on selected illnesses.

Curated from Guide for Planning your Retirement in 2015

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