September 28, 2016: Try and recall the fondest memories of the first job you had. Yes, that job when you were in your twenties and was eager to impress the boss for even a small paycheque or promotion. And the minute the salary would get transferred to your bank account? That night was a little splurge— be it on your friends, family or a romantic date. Before you come out of the memories of that wonderful time, think for a moment about how much you managed to save then.
Undeniably, saving for the future had not been on your list when you landed your first job. Saving for health insurance that would be helpful after retirement is a farsighted thought for most of the people.
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Age-related diseases and rise in medical expenses
One may not realise it during the young time, but as we grow old, our body becomes more susceptible to ailments. No matter how healthy and fit we are today, our body is bound to age with time, and our health will eventually start deteriorating. The medical expenses of a 60-year old would be much higher than that of a 25-year old.
Above this, medical costs are undeniably going to escalate manifold with the passage of time, and the advancement in medical fields may make some medical treatment out of your coverage.
One would need to have sufficient funds stocked up for health issues which might arise after retirement, along with a reliable health insurance plan for the retirement.
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Two ways to combat high medical expenses after retirement:
Buy health insurance: Though, your health expenses may be negligible today, it is important to buy health insurance now to combat with medical expenses that may arise after retirement. Needless to say, do not forget to factor in your spouse’s medical requirements while picking your policy. Further, you should start investing in a health insurance policy as early as possible because if you put it off to the later date, the more premium you would have to pay. Also, most of the insurers insist on medical tests if the insurance applicant is above 40 years of age. Further, you might be getting corporate health insurance but the same may cease to exist post retirement or when you leave your current job.
Build an emergency corpus: Every individual should build a health corpus along with a mediclaim policy. The corpus should be used only when the insurance coverage is insufficient. Also, there are various such medical expenses which are usually not covered by most of the health insurers in India. To take an example, most of the health insurance policies do not cover dental treatment. Therefore, to make sure that you or your spouse is not caught off-guard during your golden years, it is imperative to build a retirement corpus.
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Irrespective of how young you are, the sooner you start to build, the better it is for you. You can start with smaller proportions of your money, as you have sufficient time to accumulate your wealth. Further, the savings that lie in the retirement fund will also earn interest for you, thanks to the power of compounding. For instance, if you start saving Rs 2500 every month for the next 30 years, you will be able to get Rs 54.28 lakhs if we consider the rate of return as 10%.
As time is in your stride, you can invest more in equities like ULIP, mutual funds, etc. to generate high returns. You can also park a small portion of your money in debt instruments like bank fixed deposits, post office schemes, PPF, etc. to get fixed returns.
To answer the question of how much you would need to save for your retirement, consider the current scenario of expenses and inflation impact. A monthly expense of Rs 5,000 will become Rs 11,836 in the next ten years if we consider the inflation rate as 9%. In this example, we have kept the inflation rate intact for the coming ten years. So, you can easily assume what would be the scenario if the inflation rate also rises.
The Bottom line
It is highly recommended to buy a health insurance policy as medical costs are skyrocketing. Even if you are above 40 or 50, there are various mediclaim policies available for you. Though, it might be costly to buy a health insurance at a later date, not taking insurance is even worse. A single visit to a doctor can wipe out your years of savings. What may seem like a decent corpus may become inadequate after a single admittance in the hospital. So, don’t scrimp on your health insurance policy, and back it up with your savings.