Managing your finances post 60 when you have elderly parents to take care of

“I had been taking care of my parents and supporting them financially for many years. Thankfully, my wife and I were earning sufficiently well and it did not put a strain on our finances. However, things changed after I retired and the crossing of this milestone warranted a complete overhaul in my approach to my finances,” narrates 63-year-old Naresh Sinha (name changed), a retired government employee.

Planning for retirement is one of the most crucial chapters in your financial journey. However, given that in India, it is normal for multiple generations to be living under one roof, there is an important detail that needs to be given due deliberation when it comes to retirement planning. Chances are, you may have to take care of your elderly parents and provide for them after you retire and sometimes, with retirement planning itself seeming so complicated, people tend to forget this aspect.

“While I had been very diligent in my younger years in planning for my retirement, I had not given much thought to the fact that caring for my elderly parents could become slightly complicated after retirement. In fact, the first 2-3 years after I retired, my sole focus was ensuring that my family did not have to cut too many corners and that I had sufficient monetary resources to give my parents the same level of care as I had been giving them prior to retirement, Sinha says.

Deepak Chhabria, CEO of Axiom Financial Services says, “Taking care of elderly parents post-retirement without a plan can put a strain on your finances. Often, people plan their retirement, without considering that they may have to also look after their elderly parents too. The best planned retirement can become meaningless, if there is no provision made for such events.”

If you have received a retirement on lump sum or have successfully managed to create a retirement corpus through your younger years, nurturing and protecting that reservoir of funds and ensuring it continues to grow is a crucial determinant in the quality of your life post-retirement. The first step towards establishing a realistic picture of how your abilities can change after retirement in terms of taking care of your parents involves estimating all your expenses and then categorizing them into short, medium and long term. Based on those overheads and the timeframe in which you need funds to cover them, you can lay down an investment roadmap.

Sinha recalls mulling over how the change in the influx of funds after retirement would impact the expenses he incurred for his elderly parents and to what extent he could use his retirement funds to bridge that gap without compromising on other fronts. “My parents are more than 85 years of age and whatever savings and investments they had dried up long ago. I mapped my retirement income with the expenses and simultaneously started investing in debt funds that generated stable returns in the short-term and helped prevent shortfalls for the first two years,” he narrates.

According to Chhabria, equipping your finances post-retirement when you have aging parents differs largely based on the financial situation of the parents. “To begin with one needs to correctly assess their income and expenses, and determine funds required. If the elderly parents are financially and/ or have regular pension income, then the support required will be of different nature. However, if they are financially dependent, then one may have to keep that additional buffer for their expenses as well as medical care,” he explains.

He suggests “You can create a separate stream of income in your parents’ names and ensure adequate funds are available on regular basis to take care of the expenses or make provision in your income for the same. While there is no single product for this specific purpose, investing in mutual funds and creating systematic withdrawal plans can help generate regular cash flow for your elderly parents.”

A certain level of equity exposure can also alleviate your financial situations for the medium term. For long term needs and goals, SIPs in equity mutual funds can go a long way in ensuring capital appreciation. Also, while many retirees shy away from investing in equities due to the risk element, it is important to remember that equities are the primary assets through which you can reap inflation-beating returns in the long run. This will help you safeguard from situations post-retirement where your expenses start galloping faster than your income due to inflation.

“From my experience, I have learnt this is a unique scenario and one that isn’t much talked about. It is unique because you cannot stipulate a time horizon for which you will need to be financially capable for taking care of your parents. As such, it is understandable to shy away from any risky investments but what I learnt was that a calculated level of exposure to equities based on your existing financial conditions can give a much-needed boost to your investments and ensure your capital continues to grow,” Sinha says.

The other variable that will have a significant bearing on your abilities to look after your elderly parents after your retirement would be whether you have the aegis of adequate health insurance. When it comes to super seniors, health is the single biggest concern and in most cases a recurring expense too. Sinha says, “Caring for the elderly especially if they are bedridden or need help with day-to-day activities can be a costly affair. My mother is immobile and she is tended to by two nurses. After retiring, I had to ensure that I could continue availing their services. I also amped up their health insurance coverage, added critical illness riders because the possibility of medical emergencies is obviously high when you have super seniors living with you.”

Chhabria opines the lack of adequate health insurance cover can complicate financial matters to an alarming extent. “Spiraling healthcare costs and in some cases the need for long term care or cost of staying at assisted living facilities can be very high and may stretch the finances. There are tax breaks available for payment of health insurance premium for the parents, the same can be utilized. In case of a resident individual of age of 80 years or above, the basic exemption limit is ₹500,000 under the old regime, the same can be utilized to bring tax efficiency by investing in their name,” he says

Key Takeaways

– If you have received a retirement on lump sum or have successfully managed to create a retirement corpus through your younger years, nurturing and protecting that reservoir of funds and ensuring it continues to grow is a crucial determinant in the quality of your life post-retirement.

– The first step towards establishing a realistic picture of how your abilities can change after retirement in terms of taking care of your parents involves estimating all your expenses and then categorizing them into short, medium and long term

– Do not forget to factor in your debt liabilities (if any) while laying your financial plans post-retirement..

– A calculated level of exposure to equities based on your existing financial conditions can give a much-needed boost to your investments for this purpose.

– A certain level of equity exposure can also alleviate your financial situations for the medium term. For long term needs and goals, SIPs in equity mutual funds can go a long way in ensuring capital appreciation.

– Spiraling healthcare costs and in some cases the need for long term care or cost of staying at assisted living facilities can be very high and may stretch the finances. There are tax breaks available for payment of health insurance premium for the parents, the same can be utilized.

This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.