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Building the Right Health care Plan Post Retirement


Jul 27 2020


Have you taken into account these extra costs in your retirement plan?

India does not have a long-term healthcare provision or any form of social security as offered by several developed nations. Until and unless you are employed with a public sector company, you will not be able to rely on your employer to provide healthcare benefits to you for a lifetime.

Let us have a look at healthcare Inflation in India. As per data released by the Indian Government, the costs of medical care have gone up by a whopping 14% since 2010. Healthcare prices are also going up with rapid evolution in treatment methods and medicines. 

Minus the hospitalization component, there will always be regular out-of-pocket expenditure on aspects like preventive consultations, check-ups, and medicines. You should create a diverse investment portfolio to help cover medical costs to safeguard your retirement savings. 

How should you plan your retirement keeping ‘Health’ in mind?

You must first get a clear picture of current medical costs before predicting future healthcare expenditure. Based on what experts have to say, take an average of 3-5 years when calculating costs and then add 10-15% more to this sum for each year.

Other aspects like out-living your accumulated corpus or overall longevity, and deteriorating health conditions that must also be taken into account while saving for healthcare. Ensure that you have more funds as compared to your present requirements.

Analyze your lifestyle to work out any possible future ailments that may arise. Take a look at hereditary diseases in your family, and your chances of contracting the same. Always have your spouse and children included in this calculation by all means. 

Creating your medical expenditure portfolio

You should first get a comprehensive health insurance plan. The earlier you buy, the better it will be for you since the number of choices reduce with age. The older you get, the higher premium of health insurance is. The sum insured also gets restricted with increasing age as the insurance company asks for a higher co-payment ratio.

According to financial experts, you should start building your health insurance portfolio at the age of 30-35 years. In case you are starting late, and the premiums seem too high, remember that your overall peace of mind is worth paying the premium for. Even if you are retiring in a few years, it still makes sense to opt for a health insurance plan to cover pre-existing diseases whenever the coverage from the employer expires upon retirement. Choose top-up plans and critical illness cover that help increase coverage while keeping the premiums in reasonable territory. 

A comprehensive health insurance plan comes with pre and post-hospitalization benefits. Keep in mind the fact that medical insurance or mediclaim policy will only provide coverage for hospitalization and not for any additional costs. Indemnity plans do not offer coverage for preventive healthcare costs and domiciliary treatments. Pre- and post-hospitalization expenses may not be reimbursed for a long period. There are limits within 60-90 days to consider in most cases. As a result, you should separately have a corpus ready for payment of these bills. Each couple should have Rs. 15-20 lakh put aside separately for coverage of medical expenses after retirement. 

There are unit-linked and dedicated health insurance plans from insurance companies that invest in debt and equity markets while also offering medical insurance. Ensure the longevity of the medical corpus by investing the money in instruments that provide suitable liquidity and protection of capital alike. Liquid-plus or liquid funds can be good choices in this regard. Liquid funds have lock-in periods of some weeks with annual returns of 6-8%, which can easily surpass inflation. FDs with 3-6-month maturity periods may also be considered in this regard. 

If you require funds regularly, have a monthly income plan (MIP) set up for this purpose. These usually invest in debt and offer superior returns as compared to Fixed Deposits. With the performance of the MIPs dependent on market circumstances, conservative individuals may choose bank fixed deposits (FDs). The interest on FDs is taxed as per the income tax segment of the person concerned. MIPs have returns marked as long-term capital gains, and the rate of taxation is 10% minus indexation and 20% with indexation. A non-cumulative FD is suitable if you are okay with annual payouts. You get the return on an assured basis, and the interest will be directly transferred periodically to your savings account as well. 

You can get tax benefits on health insurance policies under Section 80D up to Rs. 15,000 for those below 60 years of age. The deduction is up to Rs. 20,000 for senior citizens. Deductions of Rs. 5,000 can be garnered in case of preventive health check-ups.

Also, the costs of treatment for specific diseases like kidney failure, cancer, and AIDs may be eligible for deductions of Rs. 40,000 under Section 80DDB. The cap is Rs. 65,000 for people who have more than 60 years of age.

So waste no time and get cracking on setting up the for the future with the right healthcare plan for your retirement.