आप जानते हैं नेशनल पेंशन स्कीम (NPS) क्या है.

Capitalstars Investment Advisor

इस योजना में अपने रिटायरमेंट के बाद के जीवन के लिए निवेश किया जाता है. व्यक्ति के निवेश और उस पर मिलने वाले रिटर्न से एनपीएस खाता बढ़ता है.

हर नौकरीपेशा की नौकरी के कुछ साल में यह चिंता हो जाती है कि आज तो ठीक है, लेकिन जब नौकरी नहीं होगी तब आय कैसे होगी. यानी रिटायरमेंट के बाद की आय की चिंता. इसका समाधान एनपीएस (नेशनल पेंशन स्कीम) के जरिए किया जा सकता है. एनपीएस का मतलब है नेशनल पेंशन स्कीम.

एनपीएस एक पेंशन योजना है. इस योजना में अपने रिटायरमेंट के बाद के जीवन के लिए निवेश किया जाता है. व्यक्ति के निवेश और उस पर मिलने वाले रिटर्न से एनपीएस खाता बढ़ता है.

रिटायर होने के बाद इसी पैसे से सरकार पेंशन देती है. यहां पर रिटायरमेंट की उम्र को 60 साल माना जा रहा है. रिटायर होने पर या 60 वर्ष की आयु के होने पर खाता बंद करने का विकल्प होता है. खाता बंद करते समय एक मुश्त या जरूरत के हिसाब से रुपया भी निकाला जा सकता है. बचे हुए पैसे से एक वार्षिकी उत्पाद (annuity plan) खरीदना पड़ता है. ध्यान दें पूरी राशि का इस्तेमाल भी एन्युटी प्लान भी खरीद सकते हैं. एन्युटी प्लान (वार्षिकी) क्या के तहत एक बीमा कंपनी को एक मुश्त पैसा दिया जाता है और इसके बदले वह कंपनी पूरी ज़िन्दगी पेंशन देनी की व्यवस्था करती है. इसे ऐसे भी समझा जा सकता है कि अगर इस खाते में 10 लाख रुपये हैं और उस समय ब्याज 6 प्रतिशत है. कंपनी 10 लाख रुपये लेकर आपको आजीवन हर वर्ष 60,000 (10 लाख X 6%) रुपये देगी. अगर मासिक आय का विकल्प चुना जाता है, तब हर महीने 5,000 रुपये मिलेंगे.

एक बात और, वार्षिकी या एन्युटी प्लान कई स्वरूप में आते हैं. जैसे की आप चाहें तो आपके बाद आपके पति या पत्नी को भी पेंशन जारी रह सकती है.आप अपनी ज़रूरत के अनुसार विकल्प चुन सकते हैं.

एनपीएस में चार सेक्टर होते हैं
एनपीएस खाता खोलने के कई तरीके हैं. आप किस तरीके से खाता खोलते हैं, उस बात से तय होता है, कि आप कैसे एनपीएस के तहत आते हैं.
केंद्रीय सरकार के कर्मचारियों के लिए
राज्य सरकार के कर्मचारियों के लिए
निजी क्षेत्र के कर्मचारियों के लिए
आम नागरिकों (सिटीजन) के लिए

हकीकत यह है कि इन खातों में ज्यादा अंतर नहीं है. अगर नियोक्ता से भी योगदान चाहिए, तो उनके अनुसार एनपीएस खाता खोलना होगा या फिर पुराने खाते की जानकारी देनी होगी. सरकारी एनपीएस खातों में निवेश के नियम कुछ अलग होते हैं.

एक आदमी एक ही एनपीएस खाता खोल सकता है. जब कोई एनपीएस अकाउंट खोलता है, तो उसे एक PRAN (Permanent Retirement Account Number) मिलता है. एक व्यक्ति के पास केवल एक ही PRAN हो सकता है. इसका मतलब दूसरा PRAN नहीं खोला जा सकता है. PRAN पूरी तरह पोर्टेबल है. यानी अगर एनपीएस अकाउंट शिफ्ट करना है, तो नया अकाउंट खोलने की ज़रूरत नहीं है. पुराने खाते को ही शिफ्ट किया जा सकता है.

किसी बैंक शाखा में जाकर एनपीएस खाता खोला जा सकता है. आधार की मदद से भी एनपीएस खाता खोला जा सकता है.

एनपीएस में दो तरह के अकाउंट होते हैं. एनपीएस टियर 1 और एनपीएस टियर 2. इनमें से केवल एनपीएस टियर 1 ही रिटायरमेंट पेंशन अकाउंट है. टियर 2 अकाउंट एक म्यूच्यूअल फण्ड की तरह है. खाताधारक जब चाहे पैसे निकाल सकता है.

गौरतलब है कि एनपीएस में रिटर्न की गारंटी नहीं है और न ही सरकार हर वर्ष रिटर्न की घोषणा करती है. निवेश करते समय यह बताया जा सकता है कि पैसा कैसे निवेश करना है. एनपीएस खाता खोलने का बाद चाहें तो यह निवेश का पैटर्न बदला भी जा सकता है.

यहां पर निवेश के कई विकल्प हैं -
इक्विटी फण्ड (E) में पैसा लगाया जा सकता है
सरकारी बोंड्स (G) में पैसा लगाया जा सकता है
कॉर्पोरेट बांड्स (C) में पैसा लगाया जा सकता है
इसमें फंज मेनेजर का चयन भी करना पड़ता है.

टिप्पणियां
यहां पर निवेश के दो तरीके हैं. निवेशक (E), (G) या (C) (ऊपर बताया गया है) में डाल सकता है. कॉर्पोरेट सेक्टर एनपीएस और आल सिटीजन्स मॉडल एनपीएस ग्राहकों के लिए इक्विटी फण्ड (E) में निवेश करने की सीमा अधिकतम 50% प्रतिशत है. सरकारी एनपीएस में यह सीमा 15% है.

अब एनपीएस में निवेश पर टैक्स लाभ मिलते हैं. कुछ खास स्थिति में एनपीएस से कुछ पैसा निकालने की अनुमति है. गंभीर बीमारियों की इलाज़ के लिए, बच्चों की उच्च शिक्षा या विवाह के लिए या घर खरीदने या बनाने के लिए अपने एनपीएस खाते से कुछ पैसे निकाले जा सकते हैं.

How investing in NPS can help you save tax

Capitalstars Investment Advisor

Although the National Pension System comes with exempt-exempt-exempt (EEE) tax status, there is a catch.

The National Pension System (NPS) is one of the financial products you can use to reduce your tax outgo. You can invest in NPS to save for your retirement as well.

Although the NPS comes with exempt-exempt-exempt (EEE) tax status, there is a catch. If you are planning on investing in NPS to save on tax, here are a few important points you should keep in mind.

The tax-saving benefit under NPS at the time of investing

At the time of investment, the tax-saving benefit of NPS can be claimed under three sections of the Income-tax Act, 1961. These sections are: - (i) Section 80CCD (1), (ii) 80CCD (2), and (iii) 80 CCD (1b).

Section 80CCD (1)

Tax-benefit under section 80CCD (1) is available on an individual's self-contributions to the NPS Tier-I account. Currently, an individual can claim tax benefit on a maximum self contribution of Rs 1.5 lakh in a financial year to the Tier-I account. The amount so deposited up to Rs 1.5 lakh can be claimed as deduction from gross total income before tax, thereby reducing the tax liability.

Therefore, if you have deposited more than Rs 1.5 lakh, say Rs 2 lakh, in your Tier-I NPS account, then you will be able to claim tax benefit on Rs 1.5 lakh only as per income tax laws. Remember, there is no limit on the maximum amount that can be deposited in the Tier-I NPS account.

This deduction comes under the overall limit of section 80C of the Income Tax Act. Current income tax laws allow a maximum deduction of Rs 1.5 lakh on an aggregate basis for the investment and expenditure incurred under sections 80C, 80CCC, and 80CCD (1). Therefore, if you claim deduction of Rs 1.5 lakh under section 80CCD (1), then you cannot claim a deduction of Rs 1.5 lakh under section 80C simultaneously.

Section 80CCD (2)

Tax benefit under 80CCD (2) can be claimed by the individual when the employer deposits the money on behalf of the individual in his/her NPS Tier-I account. According to current income tax laws, the employer can deposit a maximum of 10 percent of the individual's salary. Salary here means basic salary plus dearness allowance. Remember, there is no maximum restriction on how much can be deposited as long as it does not breach the 10 percent limit.

Section 80CCD (1b)

Apart from the above mentioned tax-saving benefits, an individual can claim deduction under 80CCD (1b) for a maximum of Rs 50,000 in a financial year. This additional deduction was introduced in the financial year 2015-16.

For Government employees

From FY 2019-20 onwards, government employees have an option to invest in NPS Tier -II account with a lower lock-in period. A government employee can invest a maximum of Rs 1.5 lakh in the Tier-II account of NPS to claim tax benefit under section 80C. Unlike the lock-in period till the age of retirement, the investment made in the Tier-II account of NPS under section 80C comes with a lock-in period of three years.

Lock-in period of NPS and partial withdrawals

NPS comes with a long lock-in period. The scheme matures once the individual turns 60 years. However, during the duration of the scheme account, partial withdrawal is allowed subject to certain terms and conditions.

For instance, partial withdrawal from NPS is allowed for the higher education of children, the marriage of children, purchase or construction of a residential house or flat, etc., if the Tier-I account has completed three years.

The maximum amount that an individual can withdraw from the Tier-I account is 25 percent of his/her own contribution. Also, according to current income tax laws, a maximum 25 percent withdrawal from subscriber's own contribution will be exempted from tax. Therefore, the maximum amount of partial withdrawal and tax-exempted amounts are equal.

At the time of maturity

As mentioned above, NPS will mature when the individual turns 60 years of age. To make the scheme attractive, in the July 2019 Budget, the government made some changes in the taxation of the scheme at the time of maturity.

Conclusion

Section 80C of the Income Tax Act offers a choice of various specified investment products in which one can invest and save tax. However, while making investments to save tax, one should link their tax-saving investments to their money goals.

NPS comes with a long lock-in period and certain conditions regarding partial withdrawal. In case an urgent monetary need arises, then you might not be able to withdraw from your NPS account except in the specified cases. However, on the other hand, if your goal is saving for retirement, then NPS is one option, apart from EPF that can be looked at.

Don't forget you will also grow old

Capitalstars Investment Advisor

Money management and budgeting assume the importance of gigantic proportion in times when pension benefits are all but over.

From changing smartphones frequently to actively shopping online on EMIs, 35-year-old Sudhir does not mind swiping his credit card for every little purchase. Employed with an IT major, he strongly advocates and embraces the "You Only Live Once" (YOLO) philosophy.

Sounds familiar? That is because he is not alone. There are many like him, especially millennials, who believe in instant gratification, even if it comes at the cost of addressing essential life goals. Technological advances coupled with the easy availability of credit has changed the dynamics of personal finance, and what was considered irresponsible yesterday is looked upon as a way of living today.

However, some things do not change, and one among them is the fact that "You Also Grow Old" (YAGO). There comes a point in everyone's life when with age not being on your side, taking a break from work becomes imperative, resulting in drying up of active income. It is then when your splurging habits in your yesteryears comes back to haunt you. This is the time when you wished you had been more prudent with money. Alas, that time is lost.

Why YAGO deserve attention?

According to the Economic Survey 2018-19, India's population is expected to rise under 0.5 percent during 2031-41. The reason for this rise will be an increase in life expectancy and a decline in fertility rate. The life expectancy in the country has risen by 11 years since 1990, a lot of which has to do with advancement in medical science.

All of this means a longer retired life, which calls for investing money in prudent financial instruments to build a retirement corpus large enough to see you through the golden years of your life. Simultaneously, it is essential to keep a hawk's eye on inflation, the biggest roadblock in wealth creation. Did you know that if your current monthly expenses are Rs 30,000, even modest inflation of 4 percent will push it to over Rs 97,000, 30 years down the line?

This is why money management and budgeting assume the importance of gigantic proportion in times when pension benefits are all but over. It would not be an understatement that what you splurge today is an opportunity lost to add to your wealth and build a sizeable retirement corpus by the time you hang up your boots.

Keep the specter of old-age poverty at bay

Attention to YAGO today will help you keep the specter of old-age poverty at bay tomorrow. At the same time, it will help you maintain financial freedom and be in charge of your life, without having to depend on children for support.

There is hardly a better feeling than to lead a life on your terms on retirement and pursue things you have missed out. For these to happen, it is crucial to building a large reservoir of funds for the sunset years of life.

How to curb, splurge and be retirement-ready?

A grip on investing basics coupled with curbing the need for instant gratification goes a long way in stemming discretionary expenses. At the same time, early investments in inflation-beating instruments such as equities can hold you in good stead.

For instance, a systematic investment plan (SIP) in equity mutual fund not only helps you to be disciplined with investment, but it also aids you in benefitting from the inflation-trouncing ability of equities as an asset class. At the same time, SIPs help you gain from the power of compounding in the long run that has a multiplier effect on wealth.

Monetary cap on credit and debit card usage can bring much-needed fiscal discipline and ensure you do not end up paying unnecessary EMIs, which can strain finances and impinge on essential life goals. Also, it is in your best interest to keep away from short-term borrowings for meeting lifestyle-related expenses.

Such borrowings, on a frequent basis, accompany a high rate of interest and paint you as a credit-hungry borrower. The twin disadvantages include a dent in credit score and procrastination of retirement planning.

The final word

While choices differ across individuals and there is nothing wrong in celebrating the present, waking up to the reality of growing old and saving up for it can ensure a secure dusk of life. Being an early bird in the journey can reap rich dividends in the future.

Retirement planning: 4-step plan to create an alternate support model in old age

Capitalstars Investment Advisor

The joint family is broken. But we can use our personal finances to create an alternate support model that is our own. Here is a list of resolutions I made, based on my interactions and observations at the assisted living facility.

What happens to us when we age? When I meet people living in assisted care, the range of behaviors leaves me somewhat worried. Some are generous and giving, but they are mostly a minority. Others seem angry and suspicious of the people around them. They appear worried and too focused on themselves. Such generalizations are dangerous, however, I do see these patterns and feel concerned.

Last week, I read a book for a 92-year old woman. She had a nagging body ache and was convinced she would die soon. She was determined to make it difficult for everyone else since she was suffering. The assisted living center where she was housed was tiring from her tantrums for everything.

When I finished reading to her, she broke down. The book was a moving family story. She told me how much she hates aging. How tough she found it, dealing with weakening limbs and aching bones, and how difficult it was for her to bear the pain. She recalled her youth when she played tennis and ran marathons. It was a combination of regret and resentment, but she told me she could not live with her body anymore.

Frailty is not an easy thing to deal with. Sometimes we substitute mental bravado to tell ourselves everything will be alright, said one gentleman of 90. But it lasts only until the next episode of illness, he rued. Denial is a good thing sometimes, he argued with me. You beckon the mind to support the weak body.

What happens when we all age, I fear. In another 30 years, will I become a cantankerous woman who dislikes herself and the world around her? Will my romanticized notion of a kind and generous grandmom wilt under the pressures of physical infirmities? Here is a list of resolutions I made, based on my interactions and observations at the assisted living facility.

First, I will find an alternate support system that sustains and nurtures me. The joint family of yore was a good set up that had in-built buffers and support for the young, the aged, the desolate and the invalid. We have long given that up for practical reasons. Today, we live with the determination that we will not burden our children.

But the need for community seldom goes away. We are a generation that leaned on friends, and that is how it shall be as we age. Just as the sisterhood saw us through our tough years as mothers and aging women, there will be a bond as friends age together. It will ensure we are there for one another.

There will be a house that keeps us together, and there will be food, conversations, laughter and music. There will be care for those who lose their spouse, and there will be a garden full of flowers, fruits, and birds to stroll into. I am determined to create this with my close circle of family and friends. We shall pool our resources to make this happen and bring to the table our skills as managers to create a sustainable solution that is fair, equitable and well-funded.

Second, we will ensure that our lives include the young. In my assessment, one of the reasons for assisted living facilities to be gloomy and pale is the lack of laughter. Little children and young people bring cheer, positivity, and optimism to the atmosphere. In some Scandinavian countries, college students are offered accommodation at old age homes in exchange for volunteering. We like that model.

If we can integrate the young, through a set of activities that interest them, it might be mutually beneficial. We could tell stories; teach math and languages; watch films and discuss the nuances; hear music and teach them to appreciate it, and pass on the lessons of our life without becoming too overbearing. Imagine doing this in a remote village that does not have access to such facilities. How transformative it would be for the children growing there, to receive such education from elders.

Third, we will strive to simplify and minimize. We will pursue the path of consuming less, hoarding even less and living with just the essentials. The burden of things becomes too much as we age. It is sensible to stop spending money and time on stuff and focus instead on life. That reduces our expenses, makes it easy to move when needed and reduces the stress about what happens to stuff after we are gone.

Fourth, we will find a way to finance all of this, even as we plan to retire. There is the cost of establishment, cost of living, activities, and interests, the corpus needed for healthcare and medical treatments and the details of bequest and giving away. This is a serious financial enterprise, where money must be found for the expected and the unexpected.

We are considering a consolidation of all assets into primarily financial assets that will have higher flexibility. Properties will be disposed of and the proceeds invested. We will make plans for the house and how the finances of that enterprise will be shared and managed by the group. We will draw upon the wisdom of age to establish common rules so that we can live together harmoniously.

Many accuse me of still being romantic about aging. But my perception is that the bitterness comes from the loneliness. We cannot solve it traditionally anymore because we want to be in charge and don’t want to guilt-trip the children either. Retirement planning in our head, therefore, has two components – the first 15 years of energy and strength to travel, do more, and learn. The next 15-20 years of settling down with a community of our choice, in a bond of love, attention, company and caring. In a model that includes the young, the garden, the animals and the birds. With food and music flowing every day. Our personal finances will be aligned to serve these goals.

The joint family is broken. But we can use our personal finances to create an alternate support model that is our own. We can try to preserve the joy of purposeful living.

How to ensure the financial safety of your ageing parents

Capitalstars Investment Advisor

A senior citizen’s need to keep cash at home stems from the fear that they may not have sufficient funds in case of an emergency.

Rajpoot works in a metro. He is worried about his elderly parents who live on their own in his hometown. While he respects their wish to be independent, he cannot help but fret about the threat of robbers targetting senior citizens living alone. Like all senior citizens, his parents too are vulnerable to such attacks. He is aware that they keep large amounts of cash and jewelry at home for emergencies. Rajpoot wonders what steps he should take to make the lives of his parents more secure.

A senior citizen’s need to keep cash at home stems from the fear that they may not have sufficient funds in case of an emergency. At their age, Rajpoot’s parents’ biggest fear would be a medical emergency. He should consider enrolling his parents in a cashless health insurance plan which would cover at least their emergency medical expenses. He should add them to his health policy if procuring an independent policy proves difficult. He will need to explain the process of using the facilities under the policy so that his parents become confident in managing their needs without holding a large amount of cash. There are some tax benefits also available for senior citizen parents’ medical insurance under Section 80G.

A credit or debit card or a mobile wallet is another convenience that can eliminate the need for cash. Digital payments are widely accepted, including in medical and grocery shops. Rajpoot should encourage his parents to use the same and provide assistance in whatever way possible. The payment of credit card bills could be handled by him through Internet banking. Jewelry, except what is needed for regular wear, must be stored away in a bank locker.

By taking all these measures, Rajpoot’s parents’ dependence on cash will be minimized, while ensuring liquidity. This will allow them to lead an independent life without having to worry about safety.

Retirement Planning: Rs 3.6 crore can give you Rs 93,000/month. Is this enough?

Capitalstars Investment Advisor

Some of the common aims for which Indians save money include funding their children’s education, establishing or funding their own business, investing in property and supporting parents or relatives financially.

A report by Standard Chartered shows that most of the Indians with enough disposable income to save and invest have a huge opportunity to realize their aspirations for retirement. And, around 32 percent of them are already on track to achieving more than half of their wealth goal at the age of 60. For the remaining 68 percent, who are further away, it is still possible to narrow the gap with well-defined goals and a considered wealth management approach.

The Standard Chartered Wealth Expectancy Report 2019 says that the average wealth expectancy of those in India with enough disposable income to save and invest is Rs 3.6 crore (USD518,000), or Rs 1.3 crore for the emerging affluent, Rs 2.6 crore for the affluent and Rs 6.9 crore for HNWIs.

These savings will give them Rs 93,000 per month to live on during retirement. This would be much less than both their current income and their wealth aspiration. If these individuals spend their retirement fund (mentioned above) at the average monthly rate to which they aspire, their wealth expectancy would last six years for emerging affluent, 9 years for the affluent and just 5 years for this.

The report has examined the saving and investment habits of 10,000 emerging affluent, affluent and high-net-worth individuals (HNWIs) across 10 fast-growing economies.

The study shows that there is a strong appetite among Indian savers to learn more from reputable sources and experts when it comes to making their money go further.

The report said, “Indian wealth creators plan ahead: three in five (60 percent) have a financial strategy that includes investment products. Despite this, half (49 percent) of India’s wealth creators still feel very far away from their top financial goal.”

“77 percent of Indian wealth creators believe money is essential to happiness, more than in any other market in our study. In fact, wealth is considered so important that many Indian wealth creators are anxious about their financial future: 64 percent of the affluent group say they worry so much about money that it affects their health, and 62 percent of the emerging affluent feel so overwhelmed by financial planning they fail to put a plan in place at all. The emerging affluent are also the least likely group in India to seek professional investment advice,” the report added.

Can you maximize savings?

Steve Brice, Chief Investment Strategist for Standard Chartered Private Bank, says: “Research shows most retirees fall short of their income and wealth goals. The ‘wealth expectancy gap’ arises in part from our failure to assiduously plan for our financial future.”

Hence, he suggests that the sooner you start saving, the faster you will reach your aspirations. “Securing your financial future starts with a well-thought-out plan, mapped to your life goals. The next important step is to save and invest early. Finally, by diversifying your wealth across various investment solutions, you have the potential to generate better risk-adjusted returns, putting you on the path to a worry-free retirement,” says Brice.

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Investing in good health at young age can help secure retirement. Here's how

Capitalstars Investment Advisor 

Focussing on health from a young age can reduce your financial burden in the retirement

Health is wealth is an adage extolled as often as it is ignored. While awareness around fitness has increased over the past few years, Indians continue to fare poorly on several parameters.

According to a study conducted by fitness device platform Goqii, Indians under the age of 45 saw a rise in the incidence of lifestyle diseases in 2018 compared to 2017. Incidence of diabetes rose to 5.1% from 3.6%, high blood pressure to 9.4% from 4.9%, high cholesterol to 12.1% from 5.4% and thyroid to 6.1% from 4.4%. A Cigna 360 wellbeing survey this year found that close to 82% of Indians suffer from stress, with work, health, and finance-related issues being the major causes.

Health is wealth

What if maintaining good health directly translated into monetary rewards? Would that induce more Indians to work on their fitness levels? Some health insurers think so. Insurers like ManipalCigna, Max Bupa and Aditya Birla Health offer products that monitor and incentivize fitness activities. “These benefits range from simple health check-ups that help you take precautionary measures to rewards and discounts that enhance coverage or reduce premiums,”.

According to experts, constant monitoring and proactive action can postpone the onset of lifestyle diseases. “Today, many individuals are diagnosed with diabetes at the age of 25-30. It can be easily delayed by 10-20 years and in many cases prevented altogether with the help of diet and physical activities,” says Abhishek Shah, Co-founder, and CEO, Wellthy Therapeutics. Take the case of 63-year-old retired banker Mahesh Nailwal. He has been practicing yoga for the past two decades. Regular expenses can spiral out of control if you have diabetes or other ailments. I barely need to spend money on medication thanks to my daily practice,” he explains.

Besides the cost of hospitalization, diabetes can also reduce your productivity. “It can lead to disabilities, heart issues, and eye-related concerns, dragging down your earning capacity,” adds Shah. Therefore, it is best to keep lifestyle diseases like diabetes and hypertension at bay by adhering to a healthy regime from a young age, instead of taking action at a later stage.

The earlier you start, the higher your chances of being in a healthier state over the long-term. “It is never too late to start, but as your body clock keeps ticking, you will have to invest more effort to extract the same amount of benefit,” says Shah. Much like investing in equities, it pays to start early, be systematic, dig in your heels and stay put over the long-term instead of looking to invest a lump sum closer to retirement.

Health insurance plus

A large health insurance policy is no substitute for good health. Even if you have purchased health insurance at a young age, the premium could spiral out of control by the time you need it during retirement. “At the age of 60 or 70, health premiums can shoot beyond affordable limits. Renewal premium for a Rs 5 lakh cover can rise to Rs 70,000. Many tend to terminate their policies at this stage,” says Pankaj Mathpal, Founder, Optima Money Managers.

As a result, they are left without a cover at a vulnerable stage of their lives. “It is important to build a separate health kitty for retirement during your working years,” he adds. Also, remember to replenish this corpus regularly. Unlike the health insurance sum insured which is available for use every year, once your kitty is exhausted, rebuilding it from scratch will not be easy.

This is exactly what retired government employee Bhuwanchandra Joshi, 76, has done. Out of his pension of Rs 50,000 per month, he sets aside Rs 10,000 in a liquid mutual fund every month to meet contingency needs. “This is needed irrespective of whether you have health insurance or not,” he says. It can foot bills for expenses not payable under your health policy and partly replace your unviable health policy if the need arises.

Beyond physical health

While planning for retirement, you not only need to identify recurring as well as one-time large expenses like hospitalization but also activities that can keep you fruitfully occupied. This need is often ignored as finances take center stage in a typical retirement planning strategy. Octogenarian J.P. Dhondiyal, a retired railway official, extended his career by 12 years after retirement by taking up assignments with leading corporates.

Not content with having his hands full, he worked on his mission to set up a school for underprivileged children in his hometown. “I always wanted to give back to society and work towards making such kids’ lives better,” he explains. The resolve has kept him going and he continues to oversee the affairs of the school.

Both Nailwal and Joshi, too, keep themselves busy by engaging themselves in social and community service activities. Hobnobbing with others and contributing towards charitable causes can boost your overall well-being quotient, potentially reducing health ailments and thus, medical expenses.

Why assuming the right life expectancy, inflation rate is critical to 'retiring' happily ever after

Capitalstars Investment Advisor

To calculate the retirement corpus required by you, your advisor will make some assumptions to arrive at the figure. What role do these assumptions play?

Planning for retirement should ideally start the day you start working. Retirement is that stage of life when you don't have a steady flow of income coming in. Normally, a person retires after he/she has discharged all responsibilities and now looks forward to living peacefully for the rest of the days.

While discussing with your financial advisors about how much money you would need at the time of retirement, he will ask you some questions such as how much are your monthly expenses, what is the break-up of these monthly expenses?

While calculating the retirement corpus required by you, he will have to make some assumptions to arrive at the figure. But the question arises what role do these assumptions play? What will happen if these assumptions go wrong? How does one ensure that one stays on track on the way to building the targeted retirement corpus?

Importance of the assumptions

When your financial advisor calculates the targeted retirement corpus he assumes some of the numbers and some are actual numbers. For instance, calculation of how much your expenses will be by the time you retire is based on your actual current expenses and the assumed expected average inflation rate.

Inflation

The present monthly expenses of Rs 50,000 would cost approximately Rs 2.3 lakh after 20 years assuming average inflation of 8%.

Inflation, while measured as a number, is actually the difference between the amount we are paying right now to buy goods and services and the amount we used to pay for the same goods and services, say a year ago.

Any change in the inflation rate will directly affect your monthly household expenses at the time of your retirement and indirectly affect the corpus accumulated and post-retirement expenses.

Life Expectancy

The inflation rate is not the only important assumption that directly or indirectly affects your retirement corpus. Expected life expectancy also plays a crucial role. Taking life expectancy on the lower side may lead to a situation where you run out of money before you die.

The real rate of return

The rate of return earned on one's investments plays an important role in building the retirement corpus and also in the post-retirement period. In the pre-retirement period, a low rate of return earned will make the corpus grow at a slower pace which in turn will require additional savings to be made to accumulate the desired amount.

Impact of taking a wrong assumption

Any mistake made while making assumptions for calculating the required corpus can have a detrimental effect on your retirement plans. In the worst case scenario, you can run out of your retirement money at a later stage of life.

How to stay on track?

Well everyone tries to avoid these kinds of situations where they outlive the retirement corpus accumulated by them or the retirement corpus accumulated by them is not enough to give the kind of lifestyle they want to sustain.

To avoid these dangerous situations, one must periodically review the financial goals with one's financial advisor. They should ask all kinds of questions about retirement planning from their financial advisors.

It is better to clear one's stupidest doubts and get a good understanding of retirement planning than remain ignorant.

Along with the periodical review, one must tread carefully while making assumptions. The approach to take here is to assume conservative returns and higher life expectancy.

Conservative expectation of returns solves two things - 

(i) It helps avoid the situation where the corpus accumulated is not enough to sustain your desired lifestyle in the post-retirement period due to inflation being on the higher side than expected, and 

(ii) No one can predict accurately what will be the actual returns in the future. By taking a conservative approach, you have already prepared yourself for the worst-case scenario.

Similarly, while making an assumption for how much longer you will live, it is better to assume you will live long. It is a way to avoid the situation of running out of money in the retirement period.

Will proposed new income tax slabs rates benefit senior citizens? Here’s the answer

Capitalstars Investment Advisor

The proposed new tax structure does not offer a higher tax exemption limit for senior citizens.

The new lower income tax rate regime proposed in the budget 2020 does not provide a higher tax exemption limit for resident senior and super senior citizens, unlike what is available to them in the existing tax regime. As per current income tax laws, the basic income threshold exempt from tax for senior and super senior citizens is Rs 3 lakh and Rs 5 lakh respectively. This itself gives them some tax relief in the existing structure. Such relief (via higher basic income tax exemption limits) is not provided in the new regime which treats all individuals (non-senior citizens and senior citizens) equally.

Seniors should calculate whether they would pay less tax in the existing or new regime keeping this element in mind.

Calculations show that at each income level of a senior citizen there is a specific total deduction/exemption level that he/she needs to claim such that the tax payable under both regimes would be equal. This is the break-even deduction/exemption level. If the person is claiming/intends to claim more than this break-even amount of total deduction/exemption, then the tax payable by him in the existing tax regime would be less than that in the new regime.

For a senior with Rs 7.5 lakh income, the break-even level of total deduction/exemption to be claimed in the existing regime for tax payable to be equal under both tax regimes is Rs 1,12,500. This means that a senior citizen earning Rs 7.5 lakh needs to claim a total of Rs 1,12,500 in deductions/exemptions from income (before tax) in the existing tax regime in order for the tax payable by him/her to be the same in both existing and proposed new tax regime. If the total deductions/exemptions that the person can claim in the existing regime is more than this amount (Rs 1,12,500) then the tax payable would be less in the existing regime. Alternatively, if the total deductions claimed by him/her are less than Rs 1,12,500 then his/her tax payable would be less in the new tax regime.

A senior with Rs 10 lakh income will break even if he/she claims a total of Rs 1.75 lakh in deductions/exemptions. If total deductions/exemptions claimed are below this (Rs 1.75 lakh) then the new tax regime would lead to lower tax payable and if the total deductions/exemption claimed are higher than this (Rs 1.75 lakh) then the existing tax regime would mean a lower tax pay-out for him/her.

we assume that the composition of the person's gross income allows him/her to claim the level of deductions/exemptions assumed. For example, if a person's income comprises pension and income from other sources then he/she will be able to claim standard deduction of a maximum Rs 50,000 and deductions upto Rs 1.5 lakh under section 80C (by investing in specified avenues) and deductions under section 80TTB (maximum Rs 50,000 from interest income from banks, post offices). We assume that as a person's income level increases he/she would be able to claim these and other deductions to the maximum amount allowed. A senior can claim several other deductions including for medical premium/bills under section 80D up to Rs 50,000.

How should I pay off my debt and save for retirement?

Capitalstars Investment Advisor

You can invest monies in liquid funds or a fixed deposit. Once the loan is paid off and an emergency fund created, invest the Rs 1 lakh per month towards your retirement in a mix of equity and debt mutual funds.

I am 47 and earn Rs 2.72 lakh a month. I pay Rs 49,000 as rent and an EMI of Rs 40,000 for a loan. I have dependents for whom I spend Rs 40,000 a month and Rs 24,000 on expenses. I invest Rs 1.5 lakh in PPF and Rs 33,000 as insurance premium. I want to create an emergency fund, buy a house, save for retirement and pay off my debt. Please advise.

Ankur Choudhary Co-Founder and CIO, Goalwise replies: You have about Rs 1 lakh left in hand every month which you can invest. Use half the amount to increase your EMI towards your personal loan to pay it off sooner. The remaining Rs 50,000 can be used to build an emergency corpus of about Rs 5-6 lakh. You can invest this money in liquid funds or a fixed deposit. Once the loan is paid off and an emergency fund created, invest the Rs 1 lakh per month towards your retirement in a mix of equity and debt mutual funds.

I am 38 and the sole earning member in a family of three. I took a home loan of Rs 54 lakh in April 2018 for which I am paying an EMI of Rs 50,000. Now I want to buy a car by selling my existing stocks and mutual fund investments worth Rs 9 lakh. Is this a good idea? Adhil Shetty CEO, BankBazaar replies:It would not be prudent to use up your entire savings to buy a car. Instead, invest an additional amount from your salary towards purchasing a car for a year or two. For instance, if you invest Rs 20,000 every month in liquid funds or short-duration funds, you can accumulate close to Rs 5 lakh in two years. This will give you enough for a down-payment and more. You can finance the rest via a car loan. Alternatively, you could use a portion of your bonus or income from any other source as a downpayment and opt for a larger loan for financing the rest of the amount. Ideally, not more than 40% of your salary should go into servicing debts. So keep your EMIs within that limit.

Update Your Retirement Strategy with New 2020 IRS Contribution Limits

Capitalstars Investment Advisor

If you wish you could save more for retirement, you’re in luck. The Internal Revenue Service (IRS) is letting you contribute more toward retirement in 2020. The increase in the annual limit also applies to catch-up contributions. This is great news for retirement savers since 38% of Americans aren’t confident that they will have enough money to retire, according to Pew Research Center.

The new contribution limits go into effect on January 1, 2020. The changes will affect several types of retirement plans, including 401(k), 403(b), 457 plans, and the federal government’s Thrift Savings Plan (TSP). If you’re concerned about your savings, now is the time to update your retirement strategy.

How much more you can add to your nest egg depends on your age and the type of plan you have. If you’re age 50 or over, you can take advantage of the increase in catch-up contributions. If you primarily rely on an Individual Retirement Account (IRA), your annual contribution limits will remain the same in 2020.

However, you can benefit from the changes if you have a 401(k) account or similar workplace retirement plan. Here’s what you can contribute to a 401(k), 403(b), 457 plan, and TSP in 2020:

The contribution limit is increasing from $19,000 to $19,500

Catch-up contributions for people 50 years and older will rise from $6,000 to $6,500

It might not sound like a lot, but that extra $500 can have a positive impact on your retirement savings. For instance, if you had $0 saved and contributed $19,000 toward retirement each year for 20 years, you’d end up with $698,926.23 assuming a 6% return. Increasing your annual contribution to $19,500 will give you $18,392.80 more under the same circumstances.

Since the IRS is also increasing the catch-up contribution limit by $500, you can save up to $1,000 more toward retirement if you’re age 50 or older. For those of you worried about having enough saved, these new limits can make all the difference in your quality of life during your retirement years.

Don’t be surprised if this is the first time you’re hearing about these changes. The IRS announced the new limits late in the year, and many employers and plan sponsors may have already distributed benefits materials for the 2020 open enrollment period. However, having a higher cap on the amount you can save toward retirement can make a huge impact on your savings strategy. Make sure to check with your employer and adjust your retirement savings to account for the increase.

The strategy you use for your employer-sponsored plan depends on where you work. Several types of plans are available to fund your nest egg, though a 401(k) account is the most common option. Most for-profit employers offer them as part of the employee benefits package. If your company matches a portion of the contribution you make to the plan, you should contribute at least that amount. The “free money” you get from the company in the form of matching contributions can double the size of your investment account.

You may have a 403(b) plan instead of a 401(k) if you work for a non-profit organization. Matching contributions are common among 403(b) plans, as well. Check to see if you’re saving enough to max out the employer match to take advantage of faster growth.

For government organizations, a 457 or TSP plan is the go-to retirement account option. They allow you to save for retirement on a tax-deferred basis and usually have the same contribution limits and withdrawal rules as a 401(k) or 403(b).

Even though it’s where most people begin to save for retirement, you shouldn’t rely only on an employer-sponsored plan. A traditional or Roth IRA makes a great addition to building your retirement fund. The tax benefits for IRAs are different from 401(k) and similar plans, but can still be used to your advantage.

Ultimately, your retirement savings strategy depends on your retirement goals. There are financial benefits and limitations for each type of retirement savings option. Comparing them side-by-side can help you choose which ones are right for your situation. The important thing is that you understand the contribution limits so you can make the most out of growing your nest egg.

These five steps will help you toward a safe, secure, and fun retirement

Capitalstars Investment Advisor

To have a comfortable, secure—and fun—retirement, you need to build the financial cushion that will fund it all. The fun part is why it makes sense to pay attention to the serious and perhaps boring part: planning how you’ll get there.

1. Understand Your Time Horizon

Your current age and expected retirement age create the initial groundwork of an effective retirement strategy. The longer the time between today and retirement, the higher the level of risk your portfolio can withstand. If you’re young and have 30-plus years until retirement, you should have the majority of your assets in riskier investments, such as stocks. Though there will be volatility, stocks have historically outperformed other securities, such as bonds, over long time periods. The main word here is “long,” meaning at least more than 10 years.

2. Determine Retirement Spending Needs

Having realistic expectations about post-retirement spending habits will help you define the required size of a retirement portfolio. Most people believe that after retirement, their annual spending will amount to only 70% to 80% of what they spent previously. Such an assumption is often proved to be unrealistic, especially if the mortgage has not been paid off or if unforeseen medical expenses occur. Retirees also sometimes spend their first years splurging on travel or other bucket-list goals.

3. Calculate After-Tax Rate of Investment Returns

Once the expected time horizons and spending requirements are determined, the after-tax real rate of return must be calculated to assess the feasibility of the portfolio producing the needed income. A required rate of return in excess of 10% (before taxes) is normally an unrealistic expectation, even for long-term investing. As you age, this return threshold goes down, as low-risk retirement portfolios are largely composed of low-yielding fixed-income securities.

4. Assess Risk Tolerance vs. Investment Goals

Whether it’s you or a professional money manager who is in charge of the investment decisions, a proper portfolio allocation that balances the concerns of risk aversion and return objectives is arguably the most important step in retirement planning. How much risk are you willing to take to meet your objectives? Should some income be set aside in risk-free Treasury bonds for required expenditures?

5. Stay on Top of Estate Planning

Estate planning is another key step in a well-rounded retirement plan, and each aspect requires the expertise of different professionals, such as lawyers and accountants, in that specific field. Life insurance is also an important part of an estate plan and the retirement-planning process. Having both a proper estate plan and life insurance coverage ensures that your assets are distributed in a manner of your choosing and that your loved ones will not experience financial hardship following your death. A carefully outlined plan also aids in avoiding an expensive and often lengthy probate process.

The Bottom Line

The burden of retirement planning is falling on individuals now more than ever. Few employees can count on an employer-provided defined-benefit pension, especially in the private sector. The switch to defined-contribution plans, such as 401(k)s, also means that managing the investments becomes your responsibility, not your employer’s.

One of the most challenging aspects of creating a comprehensive retirement plan is striking a balance between realistic return expectations and a desired standard of living. The best solution is to focus on creating a flexible portfolio that can be updated regularly to reflect changing market conditions and retirement objectives.

Why assuming the right life expectancy, inflation rate is critical to 'retiring' happily ever after

Capitalstars Investment Advisor

Planning for retirement should ideally start the day you start working. Retirement is that stage of life when you don't have a steady flow of income coming in. Normally, a person retires after he/she has discharged all responsibilities and now looks forward to living peacefully for the rest of the days.

While discussing with your financial advisors about how much money you would need at the time of retirement, he will ask you some questions such as how much are your monthly expenses, what is the break-up of these monthly expenses?

While calculating the retirement corpus required by you, he will have to make some assumptions to arrive at the figure. But the question arises what role do these assumptions play? What will happen if these assumptions go wrong? How does one ensure that one stays on track on the way to building the targeted retirement corpus?

Importance of the assumptions

When your financial advisor calculates the targeted retirement corpus he assumes some of the numbers and some are actual numbers. For instance, calculation of how much your expenses will be by the time you retire is based on your actual current expenses and the assumed expected average inflation rate.

Inflation

The present monthly expenses of Rs 50,000 would cost approximately Rs 2.3 lakh after 20 years assuming average inflation of 8%.

Inflation, while measured as a number, is actually the difference between the amount we are paying right now to buy goods and services and the amount we used to pay for the same goods and services, say a year ago.

Any change in the inflation rate will directly affect your monthly household expenses at the time of your retirement and indirectly affect the corpus accumulated and post-retirement expenses.

Life Expectancy

The inflation rate is not the only important assumption that directly or indirectly affects your retirement corpus. Expected life expectancy also plays a crucial role. Taking life expectancy on the lower side may lead to a situation where you run out of money before you die.

Due to improved medical and health care facilities, a person is easily expected to live above 80 years. However, while planning for retirement one must also keep in mind the increase in medical expenses that will haunt old age.

The real rate of return

The rate of return earned on one's investments plays an important role in building the retirement corpus and also in the post-retirement period. In the pre-retirement period, a low rate of return earned will make the corpus grow at a slower pace which in turn will require additional savings to be made to accumulate the desired amount.

The nominal rate in simple terms can be said as the return which is mentioned on the bank fixed deposit.

When inflation is subtracted from the nominal interest rate, you get the real rate of return. It is the actual rate of return that you have earned on your investments.

Impact of taking a wrong assumption

Any mistake made while making assumptions for calculating the required corpus can have a detrimental effect on your retirement plans. In the worst-case scenario, you can run out of your retirement money at a later stage of life.

Illustration:

A person, aged 25, starts to save Rs. 5,000 per month. Assuming the average rate of return earned is 12% & compounding annually, he is expected to accumulate a corpus of Rs. 2.75 crore by the time he retires at 60 years of age.

How to stay on track?

Well everyone tries to avoid these kinds of situations where they outlive the retirement corpus accumulated by them or the retirement corpus accumulated by them is not enough to give the kind of lifestyle they want to sustain.

To avoid these dangerous situations, one must periodically review the financial goals with one's financial advisor. They should ask all kinds of questions about retirement planning from their financial advisors.

Similarly, while making an assumption for how much longer you will live, it is better to assume you will live long. It is a way to avoid the situation of running out of money in the retirement period.

5 steps to make retirement years happier for your parents

Capitalstars Investment Advisor

As they strive to give the offspring the best, parents often end up jeopardizing their own future. They toil hard to put the children through school and college. Access to summer camps, cricket or dance lessons is encouraged. When higher studies beckon, they pour in more money for the best tuitions. When the admission letter arrives, they happily sign off the cheque or take on a huge loan. At the child’s wedding, money is no object.

Often, the same parents find that their retirement savings do not add up to much. They are left pinching pennies in their sunset years when they should be enjoying the fruits of their labor. If you have aging parents who fit the above description, step in as soon as possible. Are they saving enough? Are they investing wisely? Do they have adequate health cover? Are their documents in order? In the following pages, we will outline how you can help your parents get their finances in shape. 

SHARE THE BURDEN

In India, often earning children live off their parents. In an HSBC survey, 44% of retirees who had not saved enough said continued financial support to children was a reason for the shortfall. If you want your parents to live a comfortable retired life, share their financial burden, starting with higher studies. With children increasingly opting for studies abroad, costs have sky-rocketed. Fees for an MBA or MS program can set you back by Rs 30 lakh to Rs 1 crore, depending upon the varsity chosen. Then there are living costs.

CHANGE THE APPROACH

The next step is to ascertain if your parents have saved or are saving enough. The immediate concern on retirement is replacing regular income with money from investments. If their post-retirement costs can be adequately met through the existing corpus, then you have no worries. But if not, you must look at shoring up their savings. If they have more than 5-7 years to go before they retire, you must convince them to harness the potential of equities.

GET THEM COVERED

The rising cost of healthcare is the biggest threat to your parent’s finances. The best way to protect them is to ensure adequate health insurance cover. “Get your parents covered at the earliest. Without health insurance, their accumulated savings will take a hit rapidly,” warns Chauhan. The employer-provided family health cover may not be sufficient. Several employers have stopped offering health insurance coverage for parents in the face of rising premiums.

UNLOCK VALUE OF HOUSE

If the financial situation of your parents is grim, you may have to explore some uncomfortable options. Downsizing living arrangements is one. Explore the possibility of moving into a smaller, more affordable house in a more affordable locality. This would not only cut down on costs but also fetch a sizeable corpus from the difference in the sale value of the bigger house and cost of a smaller home.

The other option a reverse mortgage on their house, where they would receive a steady stream of income from a lender against the property. This would imply that the parents will not be able to bequeath the property to their children. With each payment, the bank’s ownership of the property increases. After the death of the owner or last-surviving spouse, the heirs can either claim back the ownership by repaying the loan, along with interest or let the bank sell the property.

GET DOCUMENTS IN ORDER

The absence of proper documentation at the time of death of a spouse can leave the other half vulnerable. As children, see to it that both parents are financially protected in the event of a death. “Ensure that assets are not held in single name and without any nomination,” insists Chauhan. Besides, having a Will in place should be a priority, and can go a long way in simplifying life for the legal heirs.

Take the right financial decisions in your 50s to prepare for retirement

Capitalstars Investment Advisor

Capitalstars Financial planners say you should start saving for retirement as soon as you start earning, but this advice usually falls on deaf ears.

In a recent survey by Birla Sun Life Insurance, only 46% of the respondents felt that retirement planning should be given so much importance.

Many people get serious about retirement planning only when they reach their 50s. It’s like running a marathon race and getting serious about winning when you enter the last mile.

Even if you put in a lot of effort, it will be very difficult to change the outcome of the race at that late stage.

As retirement is a lot like running a marathon, investors who take the right steps can effortlessly reach the finish line. But even the stragglers can secure a decent place in the race if they make the right adjustments in time. This week’s cover story looks at smart money moves that pre-retirees should take in the last few years before they hang up their boots.

CALCULATE REQUIREMENT

If you haven’t already calculated how much you need in retirement, do it now. This means taking stock of your current and future requirements, your existing investments and assets, and how long will your corpus last.

TURBOCHARGE YOUR SAVINGS

If there is a shortfall, there are two ways to boost your retirement kitty. You can either increase how much you invest every month, or you can go for investments that earn higher returns. For investors who are very close to retirement, the objective should not be to maximise returns but to maximise savings.

“If retirement is just 3-4 years away, the person can’t afford to take risks. At this stage, the focus should not be on how much you can earn but how much you can possibly lose,” says Kulin Patel, Head of Retirement, Willis Towers Watson.

DON’T GET TOO CONSERVATIVE

This is also a time to review the asset allocation of your portfolio. Take a slightly conservative approach for your investments at this age. “Reduce the allocation to risky assets such as stocks in your portfolio,” says Suresh Sadagopan, Founder, Ladder7 Financial Advisories. Also, do not take unnecessary risks at this stage.

“The cost of experimentation can be high,” says Abhishake Mathur, Head – Investment Advisory, ICICI Securities. A balanced approach (equity 50: debt 50) could also work well for people a decade away from their retirement, say experts.

At the same time, if the investment tenure is reasonably long, it won’t pay to get too conservative. The stock markets have been very volatile in the past few weeks, but H. Srinivasan is unperturbed. Barely 5% of his portfolio is allocated to equities, while the rest sits safely in fixed income instruments.

Our suggestions

1. PF is a good way to augment savings but you need a dose of equity as well.

2. With 12 years to go, start with equity funds and then shift to safer options.

3. If not willing to take risks, go for conservative MIPs that put 15-20% in stocks.

4. Buy health insurance right away to accumulate a fat no-claim bonus by retirement.

While the EPF is the best option among fixed income instruments, it may not be the best option for Srinivasan. A 100% debt-based savings plan will never be able to beat inflation. Headline retail inflation is low at 2.36%, but the actual inflation faced by consumers such as Srinivasan is much higher.

BUY HEALTH INSURANCE

Insurance is one way to guard your finances against rising healthcare costs. Even if you are covered by a group health insurance plan, you need to buy a separate health cover. Don’t wait to buy health insurance after you retire.

You may not be in a position to buy later. Srinivasan plans to buy a personal health cover when he turns 55. “I will have enough time to get past any waiting period before I retire at 60,” he says. This can be a costly mistake.

So, buy a policy when you are healthy enough and renew it continuously for greater benefits. “It is advisable for pre-retirees to purchase a personal health cover by the age of 45 years,” says Prawal Kalita, Director, Benefits Solutions, JLT Independent Insurance Brokers.

Five reasons to buy health cover before you turn 50 :

Avoid stringent tests

After 50, insurance companies subject buyers to a slew of medical tests before selling them a health plan. You can avoid these tests if you buy in your 40s.

Pay lower premium

Health insurance premiums are quite low for those below 50. If you take the tax benefits into account, the cost is not prohibitive considering the protection you enjoy.

Pre-existing diseases covered

Buy a policy when your health is good. After 50, chances of a person contracting a medical condition go up. Insurers avoid those with medical conditions or charge very high premiums.

Accumulate no-claim benefits

With every no-claim year, the extent of your medical cover increases. Buying early means you will have more no-claim years, allowing you to accumulate the benefits.

Buy online without hassles

Many insurers are not willing to sell online if the buyer is above 50. You will not be able to avail of the ease of online purchase if you wait too long.

DON’T TAKE ON NEW LOANS

It is a bad idea to burden yourself with EMIs just before you enter retirement. “It can put unnecessary stress and reduce the savings which may otherwise be available for building the retirement corpus,” says Rahul Jain, Head of Retail Advisory, Edelweiss Wealth Management. The uncertain job environment only adds to the problem. Even if you have a secure job, avoid taking on new debt.

Surrendering a life insurance policy makes sense early in the tenure of the plan, not at the fag end when it is about to mature. You may lose many of the benefits that may have accrued over the years. At this stage, it is best to continue with the plan however low the returns may be.

How to achieve your financial goals in next 10 years

Capitalstars Investment Advisor

Whether you want to save for retirement or prepay a home loan, you can achieve that within 10 years. It's all about how you make your plan.

The 10-year challenge, capturing the change in one’s physical appearance from what it was a decade ago to now, has become a social media craze. While participating in such challenges can make you feel good for some time, there is little beyond that. On the other hand, if you set yourself a financial challenge, it might not garner any likes or comments as it is private in nature, it could make a qualitative difference to your future.

That is what Mumbai-based finance professional Sandeep Singhal, 29 has done. The millennial set himself the challenge of prepaying his Rs 40-lakh home loan, which has a balance tenure of 18 years, within the next 10 years. Instead of paying the prescribed equated monthly installment (EMI) of Rs 37,500, he has decided to direct Rs 70,000 towards this purpose. The probable result? He will successfully ace the challenge if he sticks to his plan over the next six years.

Given his earlier track record of saving for five years in a disciplined manner to arrange for the Rs 19 lakh down-payment for his home in 2016, he is confident of achieving his goal. He attributes his success in acing challenges to strict discipline. “I avoided buying assets that are depreciating in nature. I have seen friends who do not manage money well and end up buying expensive mobiles, clothes, cars or bikes that give immediate gratification, but are of no use after a point of time,” he explains.

The heady, challenging twenties

Singhal’s financial discipline is an example for young individuals in the early stages of their career. They can use the financial independence they have earned to meet important goals, instead of splurging the bulk of the income on frequently replacing mobile phones or other gadgets. “Generally, the millennial generation starts saving very late. They don’t give a thought to savings in the initial years—a big mistake that can come back to haunt them later,” says Puneet Oberoi, Founder, 

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Build a strong foundation in your thirties

Thirties is when you start getting a taste of the responsibilities, with marriage, kids and house purchase, among other things, playing out over the decade. It is time to focus on your family —your dependents—at this stage. Multiple responsibilities will necessitate thinking ahead and meticulous financial planning to achieve all goals. Take the case of NCR resident Gopal Sharma.

The Forties is the time to multi-task

Like the thirties, the initial years of this life-stage, too, entail juggling several roles. However, it is also the stage when individuals are settled in life, with a clear roadmap to achieve their goals. “In their 40s to 50s, people start to settle into their lifestyle and know they need to start planning for retirement seriously. Usually, it is too late to change one’s lifestyle at this stage. So money needs to be accommodated to the chosen lifestyle,” says Jain.

Countdown to retirement

Now is the time to play safe – adventurism can damage the nest egg you have nurtured over the years. The challenge now is to keep your corpus safe over the next 10 years. “Move your investments into fixed income instruments. Pay off any pending debt including home loans or any major debt and buy a second home if you haven’t earlier to earn rental income,” says Sudheer.

Look for safe instruments like the senior citizens’ savings scheme (SCSS) or the Pradhan Mantri Vaya Vandana Yojana (PMVVY) managed by LIC. It is also time to plan your life postretirement— focus on the non-monetary aspects, too, and figure out how you wish to spend your time during that phase. Make a list of hobbies you wish to pursue to skills you want to acquire. “Many people do not invest in estate planning at all. They should make a will and plan their inheritance planning well at stage,” says Oberoi.