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Caring for Parents

Parents today, typically, prefer to live independently rather than live off their children’s earnings. But situations may arise where the child may have to financially provide for them. While that may not affect the child’s standard of living in the present, the rising inflation could put a strain on the pocket later. As such, to either provide for the parents or supplement their income, one needs to do a bit of financial planning.

TERM INSURANCE

Typically, your parents would have settled their liabilities before their retirement. Then there is no need to continue or buy fresh life policies, including term plans. This way, they can save on the premium outgo. But, if they have liabilities, or want to ensure that the surviving spouse remains financially independent, then they should continue their policies, especially term plans. Children could enhance their coverage if they have dependent parents.

MEDICAL NEEDS

Parents have fixed income in their old age and rising medical costs do affect their standard of living. Besides, a critical illness can wipe out their savings. So, include parents in your employerprovided group health insurance. Additionally, have a separate health cover with no sub-limits and with lifetime renewability through a separate senior citizen health plan, if need be. Both parents can also have a family floater policy for themselves where the sum insured can be shared by both. This will ensure lower premiums compared to individual covers. Also have a critical illness cover in place.

Also, one can claim up to 15,000 towards payment of premium for parent’s health policy (`20,000 if your parents are senior citizens).

EMERGENCY FUNDING

Senior citizens require easy access to funds, mostly to meet medical emer-gencies. Depending on the needs, a corpus equivalent to 6-9 months of living expenses can be stashed away in a bank fixed deposit (FD) with some part in a savings accounts. Liquid and debt funds also come in handy.

GIFTING

Children can gift money to parents without attracting gift tax. One can open a bank FD with the parent as a joint holder and then choose the monthly or quarterly interest option so that the parents’ regular income needs are duly met. The child may even become the nominee in the fixed deposit. As this joint FD is a gift to the parent, the interest earned on it will not be added to the child’s income.

PARENTS’ FUND MANAGER

Parents usually get retirement benefits, such as gratuity and provident fund. If one is not comfortable making investments with parents, then they can at least take more active role in managing their parents’ retirement funds. If the parents are too old or infirm, one should go for a Power of Attorney in their favour so that their parents’ finances can be managed. Bank accounts may be held jointly with parents. For monthly regular income, one can have a portfolio comprising investments in Senior Citizens Savings Scheme, bank FDs and post office Monthly Income Scheme (MIS).

STRETCHING INCOME

The major challenge is to make the retirement funds suffice over the parents’ lifetime. To ensure that inflation doesn’t eat into their post-retirement funds, ensure that a portion of their retirement corpus is invested in balanced or index funds.

CONCLUSION

Certain neurological ailments such as Alzheimer’s and Parkinson’s often affect the aged. As these are progressive diseases, the functioning capabilities continue to deteriorate with the passage of time. As such, it is important to ensure that legal matters are in order, including the setting up of a Power of Attorney and a Will for a smoother transition.

Next To Come: A Late Start in the Race