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4 things to ensure your Parents' financial security

Chances are that your parents might already be retired, if not on the verge of retirement. Here are 4 absolutely essential things you can do to assist them.

1. Work closely with them to help them think about life in retirement

   Unless they have planned for it, your parents might suddenly be hit with retirement and the surprises that accompany it. You must ensure that your parents are aware of life in retirement.

   • Do they understand where they want to live, which town/city and what amenities do they want close by (places of worship, medical support, parks etc.)
   • Do they understand what activities they want to be involved in - what hobbies or pursuit of skills might they want to occupy themselves with
   • Do they recognize that they might not have a steady source of income
   • What will they do with the lump sum they receive from their pension plan
   • Have they thought about how to efficiently deploy the proceeds of maturing insurance policies
   • Do they understand that they might need regular domestic help and perhaps even a medical nurse at home for their needs
   
   

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2. Explain to them how inflation and rising expenses will eat into their savings

   Imagine a scenario where you do not have a recurring income but your annual expenses rise at around 5%-7% per annum. Will this not reduce and deplete your savings rapidly? This is exactly the situation that your parents will find themselves in.

   • Good news is that our parents are living longer because of rising life expectancy
   • Bad news is that their savings need to last the for that much longer
   • Inflation will eat into their savings, and rising expenses will threaten their cost of living
   • Their investments must earn an after-tax return greater than the rate of inflation; fixed deposits although safe are a poor investment option
   • They must protect themselves against the possibility that they might outlive their savings
   • Understand if they have any expectations that you will be supporting them, and that they are comfortable about relying on your support
   
   

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3. Health issues and health insurance

   Medical science is making sufficient progress such that we all are living longer. Yet, these advances cannot delay the natural process of aging and the toll it takes on our bodies.

   • The cost of medical procedures and treatment is going up at a rapid pace
   • However healthy your parents might be today, some healthcare costs will be unavoidable
   • Healthcare costs must be factored into any retirement calculation
   • Its best to get a health insurance plan before your parents turn 65 years old
   • Keep an organized file of all their medical records in an easily accessible place
   • Ensure that your parents are regular with their medical tests and medication and that they are not compromising on their health

   Take advantage of the section 80D tax deduction and give your parents the gift of medical coverage. You can get a tax deduction of up to Rs 15,000 even if they are not financially dependent on you. Further, if your parents are senior citizens, you can be entitled to another deduction of Rs 5,000, giving you a total deduction of Rs 20,000 if you choose to get health insurance for your parents.

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4. Estate planning

   Nobody wants to talk about death. Yet, from a financial perspective this is an important conversation to have with one's parents because of the numerous implications it can have on the financial situation of the family. So, however sensitive the topic might be, do take time to discuss their estate planning needs.

   • Ensure that your parents have written a Will, and it is regularly updated for new developments within the family
   • Preferably get it registered with the District Courts
   • Understand from your parents where all their important documentation is related to outstanding loans, investment, insurance policies and other assets and commitments
   • Discuss with your parents if they want to give a tax advantaged gift to their grandchildren or other members of the family

At iTrust we have specially prepared a Personal Black Box - Document Recovery Kit that we feel every family must fill out. If your parents have not already filled this out, please sit down with them and have the fill this document. You will save yourself and your parents a lot of trouble in case of an emergency.

Download Personal Black Box - Recovery Kit from here

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