The wealth earned by us is indeed determined by the quality of our health. The increasing medical costs makes it extremely difficult to sustain the corpus acquired by us throughout our life if we do not make adequate planning for health insurance. This is why financial planners focus on the importance of health insurance in retaining the viability of your long run financial goal. For benefitting out of the same, you will have to select the right health insurance plan which can last throughout your retirement life and hike up the value of your financial plan.
Importance Of Having Medical Insurance In Place
All of us yearn for a secure future both in terms of financial and health-related matters. A medical expense might seem manageable in your 30s with a regular income source for adding to your corpus. But the entire story changes once you enter the golden age of your life. With limited or even nil income sources, you need to bank on your earlier saved corpus to mitigate the rising medical costs. This is why it always pays to have health insurance in the first place.
Medical emergencies do not come with a prior warning. It also has a tendency of increasing with every passing day. Keeping such things in mind, it pays to have a health insurance policy in place. You can ensure the same by ear marking a certain portion of your savings to pay the premium starting today itself. A sound health insurance policy can assist you in handling all unannounced health expenses in a smooth fashion without causing a dent in your regular finances.
Purchasing a health insurance plan and aligning the same with your financial goals can be of great assistance in shielding you from unannounced medical expenses that can arise during your golden years. With a limited income source, it becomes extremely difficult to cater to the same. This is where a health insurance policy comes in as a complete blessing by providing for treatment expenses and hospitalization charges. Some of the policies also offer comprehensive plans to cater to a more versatile set of requirements.
Let’s see health insurance benefits in detail:-
Health insurance plans also serve as an important tax saving tool. An assessee can claim deduction under section 80D on the premium paid by him for securing the health of his family and parents. This deduction can be claimed as follows:
- For Self & Family – Maximum deduction of 25000 INR per annum on health insurance for self and family. Maximum deduction of 50,000 INR per annum if you are a senior citizen.
- For Parents -Maximum deduction of 25,000 INR per annum on health insurance premium paid on behalf of parents. Maximum deduction of 50,000 INR per annum on premium payments incurred for senior citizen parents.
- A deduction of 5000 INR can be claimed per annum on health check-up related expenses. This is applicable to all the family members of the taxpayer including his/her spouse, children and parents. This deduction is part of 25000/50000 as the case may be.
It takes years of hard work to gather adequate corpus which can bring you in line with your ultimate retirement goal. However, a sudden medical emergency can squeeze out all your hard-earned funds at one go. Nothing matches up to the importance of human life and that is why we try our level best to provide ourselves and our loved ones with the best of medical treatment.
Having a medical insurance policy can guard your back in such a case by preparing you to face all sorts of emergencies without worrying about the financial setback caused by the same. However, this is possible only when you opt for a health insurance policy which has adequate cover size and tenure to render protection against all sorts of illnesses.
Real Life Examples
Let us take the example of a middle-aged man in his 30s who falls ill and has to spend 10 lakh INR on treating his illness. He does not hold a health insurance plan and finances his expenses partly from his savings and partly by taking a loan. Once he recovers from the illness, he needs to start paying back his bank debt. This will be followed by saving money to primarily meet the earlier gap in savings for fulfillment of his ultimate financial goals.
Had he taken a health insurance policy which could cover his entire medical costs, then he wouldn’t have had to face such a scenario in the first place. The premium for gaining coverage worth 10 lakh INR would have varied somewhere between 10000-15000 INR per annum approximately. He could have even got a family floater policy covering two adults and two children by shelling out a little more yearly. Spending this nominal amount could have buffered him in times of medical emergency without derailing him from his ultimate financial objective.
Read More :- 6 Retirement Planning Mistakes To Avoid
Health insurance comprises the lion’s share of retirement planning and it is time individual investors understand the same. Increasing medical expenses and future uncertainty is making it mandatory to have a medical insurance plan in place for buffering you from further troubles.
It is also necessary to maintain good physical and mental health in order to attain your ultimate financial goals. This is why financial advisors advocate these medical insurance plans to individual investors from a very early age so that they can gain more coverage by shelling out a relatively smaller premium.
Disciplined financial planning serves as the prerequisite of leading a financially secured retirement life. However, this hardly gets followed in most of the cases. Although retirement planning sounds a bit scary and confusing to most people, this anxiety can be entirely removed by avoiding the most common retirement planning mistakes committed by people. Today we are going to take a look at the biggest retirement planning blunders so that you can be well-braced while deciding on your retirement plan.
- Starting Late
Instances are not rare when people start planning for their retirement after reaching their 40s. However, at such a stage they also have other things to take care of like children, elderly parents, paying for a home loan and even maintaining a certain standard of living. Staring early in the track of retirement planning can provide you with more time to ensure the proper growth of your investments which in turn leads to greater corpus accumulation.
A 35-year-old planning to accumulate a retirement corpus of 1.5 crore INR needs to opt for a monthly SIP of 8000 INR at 12% annual returns. Whereas a 25-year-old would just need to invest 2300 INR in monthly SIP for attaining the same corpus. Thus, you can very well understand that starting early is not just a choice, it’s an absolute must.
- Inadequate Health Coverage
Growing age is synonymous with increasing medical expenses making it vital to opt for an adequate health cover which can cater to the sudden requirements you might face during the golden years of your life. Failure in procuring an optimum health cover meant for your post retirement phase can cause you to lose a major chunk of the retirement corpus in treating unforeseen medical expenses.
In many cases, employers provide group health policies but they remain active only till the time of employment. This is why it becomes imperative to opt for an adequate health insurance plan early and keep on renewing the same with timely payment of premium. Insurance companies usually extend their coverage up to 65-70 years in many cases and advise thorough medical check-ups once you cross over the age barrier of 55. It becomes imperative to opt for health coverage prior to the same and keep on increasing it on a yearly basis for catering to all medical costs.
- Overlooking Inflation Metrics
We often make the mistake of calculating our retirement corpus based on our current income and price level. Our income keeps on increasing till the date of retirement to keep in sync with the growing cost of living. However, the amount retirement corpus remains fixed based on certain decisions we take during the early stages of our life.
Inflation has a tendency of decreasing the purchasing power of money over time and hence it is necessary to consider the same while getting the retirement planning done. You can consider the expected and current inflation rate at the time of calculating your retirement corpus. Various online retirement calculators are available to assist you with the same on a monthly basis so that your accumulated corpus can easily sustain the wrath of inflation.
- Buying More Policies Than Actual Requirement
Several people end up buying around 14 to 15 insurance policies to safeguard them during retirement. But in reality, being a policy collector will not make things easier in your golden age. As an alternative, you need to learn in detail about the concept of life insurance and get a term life cover. This cover can be enough for taking care of the financial expenses of your dependants unless someone else in the family starts earning.
- Sporadic Reviewing Of Retirement Plan
A retirement plan might not be of much help if it is not reviewed and implemented properly. It is definitely not a one time activity given the long time span of the goal. In reality, changing times require changes in the plan and hence sticking to one single plan can result in faltered output. All major life events be it marriage, childbirth, taking a home loan or sending children abroad for education significantly affects your savings pattern making it mandatory to alter the investment strategy.
- Inappropriate Asset Distribution
Asset allocation has an extremely important role in deciding on the type of investment which can serve you in post-retirement stage. Asset distribution usually concerns the allocation of funds amongst different investment tools like bonds, stocks, real estate etc. Your individual needs and financial standing can significantly affect your asset allocation. Various factors like changing lifestyle, decreasing income and risk taking ability also alter significantly with increasing age.
Younger people having high risk bearing capability are usually advised to opt for equity investments as they can provide higher returns and are perfect for the long-term horizon. Your asset allocation needs to be periodically revisited for ensuring that it is appropriately aligned with your end goals. Acting otherwise might leave you with insufficient corpus which might not be able to beat the rising inflation metrics.
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The spread of financial literacy amongst Indian people have made them conscious about the requirement of retirement planning from an early age. Maybe this is why it is not rare to come across job fresher’s belonging to the 20 something age category seeking the assistance of financial experts in planning the golden days of their life.
With more and more youngsters opting to work under the private sector, a proper retirement planning is slowly turning into the need of the hour. Job insecurity and lack of government pension can be sighted as the biggest causes of the same. But if you are aware of the mistakes lined out above, then you can definitely attain your retirement goals in due course and with minimal obstacles.Download Minty app App store & Play store and chat with experts and know the best retirement planning strategies.