In this modern era all are concerned about their personal lives. Nobody is bothered to think about their parents. Most of the times old age people suffer from financial problems, health problems, etc. We all will have to give a thought that how much pain they have suffered to make us reach this level, how much money they have spent for our education, how much money they have spent for our heath care, etc. Old age is the time during which we have to give them back all the love, financial support, health care and everything that they have provided us when they were young.
“The old age is second childhood” this saying describes the mental activeness of people living in their old age, but all the old aged people do not come under this category, there are some people who become more intelligent and pro active as the age passes by, but the percentage is very less. During this stage of life people become very much susceptible to diseases, their activeness starts to decrease and there are many more changes which have a profound effect on their health.
Let us have a look at some astonishing facts
· A study conducted in America has revealed that nearly 70% of parents who are aged think of living an independent life without getting any help from their children.
· One third of the total aged people hesitate to ask help from their children who are earning and have established themselves.
· On the other hand more than 75% of adult children think of their parents leaving alone.
· The number of children who sit and discuss with their parents about the problems regarding the health and financial matters is less than 30%
The Indian culture is completely different from American culture because the Americans have nuclear families whereas we Indians strongly believe in the joint family. Hence it becomes very important for us to think how we can support them like how they have supported us during our childhood. According to the estimates the population of the old age will be 113 million by the year 2016, which will jump to 179 million by the year 2026 and that’s not all by the year 2030 it will reach a whopping 218 million.
Need of Retirement planning
Need is a vehicle to get the satisfaction. According to Maslow, a person has five types of needs. They are physiological, safety and security, social, esteem, self-actualization. Aged people have social and security need. It does not mean that they had not felt this need before; they had felt it and had satisfied it too. But with the passage of time they spent the major portion of their earnings either in educating and up bringing their children or in building a home of their own or in taking care of their parents etc., this situation is seen in most of the Indian homes. As they reach their old age then they realize that the time and money that they have saved for themselves may not be sufficient for them to lead a tension free life after the retirement. In this case it becomes the duty of their children to see that their parents do not face too many financial problems.
Four Types of Children
The children can be divided into four types based on their thinking about their parents and securing their future. They are;
1. Those who are concerned about their parents future and have taken some steps to see that they live a peaceful life in their old age
2. Those who have thought about it but have not taken any step because they think it’s the duty of their brother or sister.
3. Those who think that they have done many arrangements but in reality it is never going to help their ageing parents
4. Those who have never thought about that
Questions to be Answered
There are some questions which have to be answered by the individual to know where he stands in terms of securing his parents future, they are:
· What are the sources of income of your ageing parents post retirement?
· Are they draining their savings?
· Do they have substantial pension?
· Will there be any financial crisis in case of financial emergency?
If a person answers these questions with ease and as an outsider what are his opinions about the financial state of his parents and in case the person is stumped by these questions and feels difficulty in answering them then it is a matter which has to be given a serious thought. The only condition that can be put while answering the question is that the person should tell the truth to himself.
Ways to Secure your parents Future
There are various ways in which the children can secure the future of their parents
- Post offices
The term insurance has a very broad meaning and we know that both living and non-living things can be insured. We are more concerned about our parents here.
A person who is earning and capable of paying the premiums may take the insurance policies and appoint either of the parents as the nominee. In case of his/her death the parent can get the sum assured. It is not that he should take the death cover only he can take the survival benefit insurance on his name and can make any parent as nominee. Once the maturity period is over they can get the sum assured.
The son or daughter should ensure that both the parents have the medical insurance as the old aged parents often have health problem and if there is any major problem then there will be no shortage of funds.
Another option which is offered by most of the insurance companies now is the ULIPS (Unit Linked Insurance Plans). This offer is given mostly to attract the customers who are interested in the capital markets as well as are looking for insurance policies. We can have this plan on our parents name and propose certain amount towards premium and this premium can be paid once as lump sum or can be given as the premium once in a month, quarterly, yearly.
The company deducts a part of the premium towards the cost of the insurance, another part as the charges and the balance amount is called as the “allocated premium” is invested in the funds of the certain companies which are selected by the proposer from the list of all the options given. The returns that are the sum assured or death cover, payable in the event of death during the term depends on the premium that is paid. Usually the sum paid is 1.5 times the single premium or 5 times the yearly premium. According to the guidelines the sum assured cannot be less than 5 times the annual premium or 1.25 times the monthly premium. The person who has invested in the funds of certain companies gets good returns if the company is doing well in the market.
The banks are the main source where any person can get the money. We can approach the banks not only to take the loans or making a deposit, there are banks which provide facilities or many schemes just for the sake of old aged. Let’s have a look at some of the schemes.
a) Fixed Deposits (FD)
A way in which we can secure the future of our parents is by keeping the fixed deposit (FD) in their name. If a person is bothered about securing his parents future then this is one of the easiest way. What can be done is that the money can be kept as FD and the returns or the interest that comes can be deposited directly to the parents account. This is an easy method where the person keeping the FD’s can direct the bank to transfer the interest to his father’s or mother’s account. The interest is deposited in the account as per the directions of the depositor it can be monthly, quarterly, yearly, or once the FD has matured. If the FD’s are kept in the names of the parents and incase the parents are the senior citizens then most of the banks offer an extra 0.5% of interest on the FD’s
b) Standing Instructions
If a person is too worried of the parent’s future and is ready to spare share of his earning or salary then a facility is given by many banks this is called as Standing Instructions. A person who has the salary account in a bank and if anyone of his parents account is in the same bank then he can direct the bank to transfer a part of his salary to the account of his parents. How much is transferred is decided by the account holder and most of the banks do not charge anything for transfer.
As said before there are parents who never want any kind of help from their children and like to live on their own. In that case one suggestion that the children can give is reverse mortgage loan (RML). The reverse mortgage loan is not new to countries like America but it was introduced in India in the 2007 budget. In the reverse mortgage loan the person pledges his home to a bank and in return the bank gives the money equivalent to the value of the house in the present market. The money given is again depends on the choice of the borrower, he may take a lump sum amount or may ask for monthly or yearly payment in installments. All scheduled Commercial Banks & National Housing Bank (NHB) have made schemes of RML operative, since 2007.
The guidelines for this has been set by the National Housing Board (NHB), some of the main features are;
· This facility can be availed by the citizens who are above the age of 60
· The borrower must be the owner of that property
· The value of the factors are decided by taking various factors into consideration such as the prevailing rate of interest, the present market value of the house, the age of the borrower etc
. The borrower is not liable to pay any kind of interest. When he permanently leaves the home the home is sold by the bank. In case the bank gets excess money then the excess amount will be given to the borrower and incase if he is dead then it is given to the spouse or to the heirs.
The advantages of this scheme is
· The borrower will hold the ownership rights till the bank sells the property
· The money that the bank gives is considered as the loan and not as income so the borrower need not pay any tax for it
· This scheme can be availed by all the owners irrespective their income group
· This loan is given to such an age group to which there are not many loans given
· The payment made will be according to the wish of the borrower
Some of the disadvantages attached to this scheme are;
· India has the culture of joint family and it may not be very much open to such schemes
· The property value may rise suddenly due to some factors and the borrower may feel cheated
4. Post office Savings
The Indian postal department also provides many schemes to help the senior citizens or old aged to help them in the financial matters. Some of the plans or schemes offered by the Indian Postal Department are Suvidha which is a convertible Whole Life Assurance Scheme, Monthly Income Schemes (MIS), Santosh which is an Endowment Assurance Scheme and Senior Citizens Saving Schemes (SCSS) and many more.
The issues discussed above are just few of the ways in which we can secure our parents future. The most important thing here that we want to convey is, you take any plan or any policy but your parents should get their share of protection, affection, secured feeling that we felt in our childhood each time we took a step. Although it was us who finished our studies and are earning now but we don’t know how many sleepless nights our parents have spent to see that we don’t have to face any financial difficulties right from the moment we are born till the moment we receive our first salary. It is rightly said love and protects your parents because they are very precious.