Retirement planning at 40: Guarding against various risks
The current pandemic situation has highlighted the importance of having a medical cover in times of such crisis situations
Job loss can be a major setback for people with one source of income as it would deteriorate the financial condition of the person. Further, there might be instances where there is a lag period until the person resumes employment and for the time being, he may be required to sustain on the savings. There are a few important things to keep in mind while retirement planning at age 40.
“The ongoing pandemic has clearly taught us the importance of having a life and health insurance. That said, one needs to create a contingency corpus, which would be available to self & family in case of any exigency/job loss,” pointed out Ankur Maheshwari, CEO, Equirus Wealth.
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Sky-rocketing medical expenses have made it mandatory for every person, especially those nearing or in their 40s and above, to have a mediclaim insurance policy.
That said, many insurances companies also, provide insurance cover for job loss. Though such policies are not highly sold in the market considering they may get quite expensive, people in the higher income brackets may consider such an option in addition to the creation of emergency fund as mentioned above.
Expert view
“In order to safeguard oneself from risks arising out of loss of job or retirement, one can opt for Pensions schemes, etc. which help in providing regular income. Further, the medical insurance premium paid by the policyholder would also be available to them as a tax deduction u/s 80D while computing the taxable income,” explained Suresh Surana, Founder, RSM India.
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Further, it is crucial that a person whether at age 40 or 30, should have an emergency fund in order to take care of job or other life crisis where there is no inflow of income. Such emergency fund can be generated by the accumulation of a certain percentage of the salary as savings over a number of years.
“Every person should determine their monthly expenditures and create an emergency fund based on 6 months to 1 year of such expenditure determination,” said Surana. Although the same can be decided basis the running household expenses adjusted for inflation and any other liabilities.
Succession plan
Lastly, it is important to have a succession plan in place, feel experts. As per the one survey done by Knight Frank in March 2021, 84% of ultra-wealthy Indians have reassessed their attitudes when it comes to succession planning in light of the current pandemic.
“By way of writing a will or creating a trust, it is imperative that the family does not go through hassles, in case of any eventuality,” said Maheshwari.