Financial Planning for Indian Couples with PensionBox

Retirement is an essential phase, as it marks a significant life transition. This is especially true for couples in India. To guarantee financial stability during this phase, strategic planning and foresight are required to make the most of retirement. Planning for a secure and comfortable retirement is a top priority for many couples, especially in a vast country like India. As life expectancy is continuously on the rise and healthcare costs are touching skyscrapers, it’s vital for Indian couples to carefully estimate their financial needs for the post-retirement years. Understanding and predetermining the amount of money they will need to retire comfortably is crucial. In this article, we shall deeply explore the key considerations and strategies that are important for Indian couples to achieve a financially secure, sound, and enjoyable retirement. Read till the end.

Understanding retirement needs

What kind of lifestyle you desire after retirement affects your retirement planning as it determines the amount of money you'll need to accumulate.

Life expectancy is another major factor in retirement planning. As science and technology advance, so is healthcare. Since people are living longer, it means that their retirement corpus needs to last longer. Life expectancy in India is around 70 years on average. However, the sensible way to go is to plan for at least 85 years to be on the safe side.

Calculating Retirement Corpus

Calculating your retirement corpus beforehand is essential to get a rough idea of the life you can maintain after retirement.

• 1. Calculating Monthly Expenses: To start your retirement planning journey, the first and foremost thing will be to estimate your current monthly expenses. This would include household expenses, utilities, healthcare costs, leisure activities, travel, and any other recurring expenses. One must also consider inflation, which historically averages around 6% per year in India. If your current monthly expenses are ₹45000, you should plan for higher costs in the future due to inflation.

• 2. Healthcare Costs: With an increase in age, medical expenses tend to increase. Even with health insurance, these expenses can be significant. A separate health fund or health insurance policy is essential. One must think of allocating around 10-15% of their retirement fund for healthcare.

• 3. Debt and Loans: One crucial thing to keep in mind is to make sure all debts and loans are cleared before you approach retirement. Entering retirement debt-free will provide peace of mind and reduce your monthly financial burden.

Income Sources in Retirement

• 1. Pension Schemes: Pension schemes from a government or private employer are an essential component of retirement planning as they will be a valuable source of regular income. Couples must consider investing in pension plans for a better future.

• 2. Investments: Investments in mutual funds, stocks, real estate, and fixed deposits are essential for couples for a stress-free retirement. The returns from these investments will help generate a hefty retirement corpus. The earlier couples start investing, the better.

• 3. Annuities and Insurance: Annuities provide a robust income stream and can be a reliable part of your retirement plan. Life insurance policies with maturity benefits can also offer financial support.

Government schemes and benefits

1. National Pension Scheme (NPS):

The National Pension System (NPS) is a voluntary, defined contribution towards savings for retirement that enables individuals to make the right decision for the future by generating savings throughout their lives. Anyone in the age group of 18–70 years, public or private employee, resident or non-resident, can become a part of the National Pension Scheme program. Section 80CCD(2) of the Income Tax Act covers the contribution of an employer to the employee's NPS, which the employee can claim as a deduction. Section 80C of the Income Tax Act covers the tax deduction of ₹1.5 lakh for self-contribution to the National Pension Scheme under the old tax regime. Section 80CCD(1B) of the Income Tax Act covers the additional deduction of ₹50,000, which is allowed if a contribution is made towards the NPS under the old tax regime.

Hence, if you are planning your finances to save for the future and have a peaceful life after retirement, you must take this into account.

2. Employee Provident Fund (EPF)

A Provident Fund, or Employee's Provident Fund (EPF), is a savings and retirement fund for salaried individuals and their employers. The salaried individuals of an organization contribute a small part of their basic pay every month. Similarly, the employer also contributes a similar amount on their behalf towards the PF scheme. Contributions to EPF, as well as the proceeds, are largely tax-free, but employer contributions to EPF, NPS and superannuation above ₹7.5 lakh a year in total are taxable, and interest on high employee contributions can also be taxed. So, if couples use EPF the right way, they can end up with a sufficient corpus after retirement.

Indian couples are constantly worried about how to sustain their financial lives, especially after retirement. In this guide, PensionBox has tried to ease that burden by providing key considerations couples must look at during their retirement planning. We hope that this has been useful to our readers.