Looking for the best investment plan for your parents post retirement?

Worried that your parents might not be making smart investment choices, here is how you can help them.

When you were young, your parents helped set you on the right path, right from school projects, learning to cycle to holding your hand all the way into adulthood. Now that your parents have entered their golden years, it’s your turn to return the favour. Ensure they remain financially secure and independent for the rest of their lives.

You will need to start with sorting their investments.

1) Find out if they have saved enough – Thanks to inflation, their annual expenses keep rising. Their income should be able to keep up with their basic living expenses and beat inflation at the same time.

2) Medical cover to protect your parents – With age comes health issues. If they have not already taken a Health insurance then you can include them in your health policy. You could avail 80D tax benefit of upto Rs 30,000 for your parent’s health cover (if they are aged 60 or more) and up to Rs 25,000 otherwise. You can also claim a further deduction of Rs 5,000 on preventive health check up for them.

3) Reduce their tax liability – If your parents are conservative in their investment approach then they would have parked their retirement fund in Fixed Deposits and Senior Citizen Savings Scheme (SCSS) for regular income. But interest income from both FD and SCSS are fully taxable. Further, TDS of 10% can reduce their in hand income.

Debt Mutual Funds are an ideal investment for regular income and wealth protection. They generate returns of 8-9%, beat inflation, offer liquidity and tax efficient income. Enroll them in a Systematic Withdrawal Plan (SWP) generating periodic income as per their requirement. This way they gain indexation benefits as the income from Mutual Funds is considered as capital gains. So if your parents are in the 20% and above tax slab then Debt Funds will a smarter investment option for them.

4) Save tax under 80C deductions – Remember Pension received at retirement is taxable. If your parents come under any tax brackets, then it would make sense to invest in tax saving ELSS Mutual Funds. ELSS offer 80C tax benefit of up to 1.5 lakhs and generate a return of 15% or more. Unlike other tax saving products, they have a lesser lock in period of only 3 years.

5) Help them live a comfortable life – When planning for Retirement, investors only take into account basic living expenses. Longetivity and life styles expenses such as pilgrimage, visiting relatives, gifting grand children, shopping for themselves, vacations with friends and basic medical expenses are often not taken into consideration. This will increase their expenses and as a result impact how long their fund will last.

It is still not too late for them! At 60 years, your parents still have another 25-30 years to live, all thanks to the advancement in Medical sciences! Investments in Equity Mutual Funds can give their retirement fund a much needed boost. Invest 20-30% of their corpus in Equity Funds and the balance in Debt Mutual Funds. This will provide both growth and regular income.

Retirement doesn’t have to be about compromises and sacrifices. Good investment planning can allows anyone to live their golden years with pride and self respect. As they say you have only one 1 life to live, so help your parents live their dream life.

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Written by Preeti Chauhan
Certified Financial Planner & a newbie Runner