After retirement capital protection, income and health insurance are important financial objectives. Though capital protection is an objective after retirement, with increasing life spans and high inflation, equities, appropriately weighted in your asset allocation, should continue to form a part of your investment portfolio. Having said that, at this stage of life, your investment should pre-dominantly be in debt
- You should consider investing in Senior Citizens Savings Scheme (SCSS). The minimum investment limit in this scheme is Rs 1,000 and the maximum limit is Rs. 15 lacs. This investment qualifies for deduction under section 80C of the IT Act. From a liquidity perspective, the scheme has a period of 5 years and carries an interest rate of 9 per cent, one the highest applicable rates for similar instruments. A penalty of 1.5% per cent is levied on the amount deposited, in case the deposit is withdrawn before 2 years and 1% if the amount is withdrawn after 2 years, but before the expiry of the term. If the returns from this instrument do not exceed the basic exemption limit of Rs 2.4 lacs, they stand to earn tax-free returns. Seniors who have their immediate liquidity concerns addressed though other instruments, should try to maximize investments under this scheme using their surplus funds, since this offers attractive returns and capital safety
- Health is an important aspect of our life at any age, but is extremely important at this stage. It is important that you have a long term health insurance plan to address you and your spouse’s healthcare needs, even in your retirement years. Senior citizens, who were covered under their employer’s group health insurance plan before retirement and did not have an additional individual health insurance or Mediclaim plan, have two options, upon retirement.
- Immediately on retirement, seniors can switch to the retail policy of the insurer offering the group insurance plan to their former employer. IRDA’s portability guidelines cover policy transfers from group to retail, allowing retiring employees to exercise this option. However, the premiums and the policy terms may change once you switch to the retail plan. In this option certain benefits like waiting period of pre-existing medical conditions, will be carried over from the group plan to the individual plan. However, in this option, you have to continue with the group plan insurer.
- The senior can consider buying an individual health cover from an insurer of his or her choice. Essentially this means that you are buying a new policy, with new terms and conditions.
- Seniors should evaluate both the options and then make an informed decision depending on their personal situation. As discussed earlier, you claim tax benefits under Section 80D for your Mediclaim premiums.