Four easy steps to secure your retirement financially

Healthcare takes on critical importance as we grow older, especially with the rising costs of medical treatment and increase in lifestyle diseases.

When you think about your retirement, how do you see it? Does it involve a lot of travel, the pursuit of hobbies, passion projects, or spending time with your loved ones? Whatever your interests, you need to start planning for them now, to make them a reality while keeping your life free from financial stress.

Healthcare takes on critical importance as we grow older, especially with the rising costs of medical treatment and the increase in lifestyle diseases such as diabetes, heart diseases, respiratory problems and metabolic issues. You also need to be prepared for unexpected financial expenses due to diseases such as COVID-19, and manage your retirement medical costs keeping all of these aspects in mind.

Healthcare costs include diagnostic tests, doctor consultations, in-patient hospital care, wheelchairs, prescription drugs, eyeglasses, hearing aids and ambulance charges.

Calculating healthcare costs  

As a rule, you should plan for at least Rs 15-20 lakh for post-retirement medical expenses for yourself and your spouse. However, you should keep evaluating these costs to accommodate your advancing age and allow for medical inflation. India witnessed medical inflation of 14 percent in 2021,(1) the highest among Asian countries. You should also consider your geographical location, as healthcare costs are higher in urban areas.

Another way to approximate your healthcare costs is to calculate your average expenditure over the past three years and then apply the annual inflation rate.

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Investing in an insurance policy

The healthcare costs of retirees depend upon several factors, including lifestyle (smoker/alcoholic), family history (hereditary diseases) and pre-existing or chronic conditions. Healthcare expenses also influence the selection of insurance plans.

You can choose to invest in insurance policies such as term-life insurance, pension plans, long-term-care insurance and particularly, healthcare insurance. One of the best ways to take care of your healthcare costs is to invest in a health insurance policy that gives out cashless claims and has lifetime coverage.

Before investing in any healthcare policy, you should carefully evaluate varied aspects of the policy, such as whether pre-existing diseases are covered by the policy and, if not, the cooling period after which they may be included in the policy. Please check the maximum entry age limit, whether cashless claims are available and if there are any conditions or age limits for policy renewability. Also, find out whether doctor consultation and medicine expenses (OPD) or dental treatments are covered. You must also check the list of network hospitals to ensure it includes a hospital you know or regularly visit.

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Strategising financial management for your retirement lifestyle

For all your retirement goals, be they travel, healthcare or starting a new venture, you need to assess your financial ability to afford your lifestyle. Insurance policies may help, but more is needed. It would help if you built multiple streams of revenue to take care of costs not covered by the insurance and pay for unexpected retirement healthcare expenses.

You must effectively plan and manage your retirement expenses. For this, you can employ several strategies. Start by monitoring your current financial situation and lifestyle to estimate your future expenses. Additionally, remember to add inflation to the computed living expenses. Creating a contingency or emergency fund is also advisable to support expenses not included in the insurance and pay for additional costs that may arise, such as nursing help, home and car repairs, and healthcare equipment.

Focus on building a retirement corpus through regular investments in multiple financial instruments such as mutual funds, stocks, bonds or fixed deposits. You can consult a financial advisor, build a diversified portfolio, reduce risks and earn sufficient returns. Finally, start building the corpus early, so that you have enough money to afford your retirement.

Availing of tax benefits 

All your retirement expenses might seem overwhelming, but they come with tax benefits, too. Under the old tax regime, you can claim a maximum deduction of Rs 50,000 applying section 80D of the Income Tax Act if you pay the premium on health insurance for yourself, your spouse or your children. You can even claim an additional deduction of Rs 50,000 if you are above 60 years of age or paying for your parents above 60 years of age.

Apart from healthcare, you can even avail of tax benefits on pension income. There are several exemptions and deductions that can reduce the tax amount. If you are over the age of 60 years, you can claim a deduction of Rs 50,000 on your pension income. Even the money withdrawn from provident fund accounts after retirement is tax-free.

After considering all these factors, planning and managing your finances is essential to help you support your family's lifestyle when you retire. Lack of proper planning can erode your wealth and lead to poor healthcare.

Planning for retirement is essential to ensure a comfortable and stress-free life in your golden years. By carefully considering your healthcare costs, investing in the right insurance policies, and strategising your financial management, you can build a strong financial foundation for your retirement.