[SmartCat]

Originally Posted by PatienceWins

Inflation makes it very difficult. and inflation will continue post retirement too. The retirement corpus investment returns have to cope up with the rate of inflation and cater to the big ticket purchases/ services over the years, in addition to daily expenses.

I have an alternative view on inflation and retirement. Post-retirement, depending on the age group (60 to 85), our expenses might remain flat or perhaps fall, despite inflation.

If you keep a tab on your expenses, classify them into:

- Living/basic expenses
- Medical expenses
- Lifestyle expenses

You will notice that medical expenses are low currently while lifestyle expenses are high. But post-retirement, the two will most likely just change places. For most people, it is unlikely our lifestyle interests would remain the same at 45/55/65/75.

This inflation bogeyman should not force people to take unnecessary risks. Financial planners recommend equity % post retirement limit at (100 - age) and I think it makes sense. That is, if somebody is 70 years old, equity % should not be more than 30%. By design, fixed income returns will be slightly over inflation rate, in most countries.

[PatienceWins]

Originally Posted by SmartCat

You will notice that medical expenses are low currently while lifestyle expenses are high. But post-retirement, the two will most likely just change places. For most people, it is unlikely our lifestyle interests would remain the same at 45/55/65/75.

Good point. I used to think the same. My understanding changed based on retired elders in native place who are in 60-75 age bracket mostly.

1. As they are healthy with an active lifestyle/ exercise, the medical expense is still the same/ minimal, but they are traveling a lot - mostly with other senior citizens who are also retired and have a lot of time. Mostly local trips for functions/ inter state vacations with others/ visiting relatives and friends for get together etc..
2. They are also upgrading to new creature comforts as required with age (automatic car instead of manual, Ather electric scooter as Activa is heavy etc).
3. The white goods (like TV/ Washing Machine) requires replacement as they do not last long or there are new items introduced (Induction Cooker/ Air Fryer etc). Ecommerce portals have made it very easy to sit at home, browse with all the free time and do small purchases frequently.
4. Entertainment (OTT channels/ movie outings/ hypermarket visits/ smartphone etc) as they have a lot of time and want to be connected/ updated as younger generation.
5. Big ticket expenses like marriage, higher education for younger children.These take a big hit on the retirement savings, unless planned separately.

As they consult us while making these purchases/ hotel bookings/ services etc, I was wondering how retirement expenses would reduce. Now we have health, but not much time as we are busy with professional work/ children. With increase in lifespan/ healthspan, I think we should plan for a time when the social/ entertainment/ travel expenses would increase with a lot of free time.

After 75, they are mostly getting to the phase with more medical expenses and less lifestyle expenses like travel/ upgrades etc. Some with critical illnesses which take a big toll on health/ finances. So having a good personal health insurance is must.

[JediKnight]

Originally Posted by SmartCat

I have an alternative view on inflation and retirement. Post-retirement, depending on the age group (60 to 85), our expenses might remain flat or perhaps fall, despite inflation.

True. I think this inflation thing is over hyped in the sense that it assumes that you would have similar lifestyle when you are in your retirement. At present my biggest expenses are education for my kids followed by real estate which I will hopefully settle soon. After that there is a drastic reduction on my expenses. With the exception being an increase in medical expenses but that can be offset by proper planning.

Originally Posted by PatienceWins

[*]As they are healthy with an active lifestyle/ exercise, the medical expense is still the same/ minimal, but they are traveling a lot - mostly with other senior citizens who are also retired and have a lot of time. Mostly local trips for functions/ inter state vacations with others/ visiting relatives and friends for get together etc..

This is not much of an expense actually. Especially if you travel for short distances. For travelling within India, India Railways is an excellent choice for senior citizens. They get an excellent discounts and the new breed of trains are safe and comfortable.

Originally Posted by PatienceWins

[*]They are also upgrading to new creature comforts as required with age (automatic car instead of manual, Ather electric scooter as Activa is heavy etc).

Again not much of an expense if thought through. My parents for example now days don't use a private vehicle most of the time. They always go by taxi. They have a list of trusted cab guys in my native town and somebody is always available. Turns out much cheaper than owning a vehicle plus far less headache. Example in my native town of Shimla getting a parking space is almost impossible, not to mention the enormous traffic jams and general stress of driving.

Originally Posted by PatienceWins

[*]The white goods (like TV/ Washing Machine) requires replacement as they do not last long or there are new items introduced (Induction Cooker/ Air Fryer etc).

These are actually getting cheaper if you adjust for inflation. These will hardly affect the budget of middle class guy.

Originally Posted by PatienceWins

[*]Big ticket expenses like marriage, higher education for younger children.These take a big hit on the retirement savings, unless planned separately.

These expenses have to be accounted for before retirement. If these are not taken care of I believe you cannot retire

[PatienceWins]

Originally Posted by JediKnight

This is not much of an expense actually. Especially if you travel for short distances. For travelling within India, India Railways is an excellent choice for senior citizens. They get an excellent discounts and the new breed of trains are safe and comfortable.

Again not much of an expense if thought through. My parents for example now days don't use a private vehicle most of the time. They always go by taxi. They have a list of trusted cab guys in my native town and somebody is always available. Turns out much cheaper than owning a vehicle plus far less headache. Example in my native town of Shimla getting a parking space is almost impossible, not to mention the enormous traffic jams and general stress of driving.

Elders in our family also use railways mostly. But what I heard from them is senior citizen discounts are no longer available. I just checked online and it is not yet restored in the recent budget.

When a group of family members/ friends go for long trips, they usually go with a local tour operator or hire a tempo traveller for overnight trips.

Last Saturday, my FIL (73 years) with company of MIL drove to bangalore from kerala - 540 kms, attended a function here on Sunday and drove back on Monday. He could not get a train ticket as it was a sudden late decision. I hope I will be able to do the same at 60 years.

I see many examples of elders driving/ riding around the country post retirement.

In our native, there are people in 80s who are very active and still driving/ riding on a daily basis. They properly make use of the weekday/ off season rates for movies/ travels etc.

Originally Posted by JediKnight

These are actually getting cheaper if you adjust for inflation. These will hardly affect the budget of middle class guy.

Agree that the white goods are getting cheaper adjusted for inflation, but they do not last long or give frequent issues necessitating replacement/ repairs. The thin margins during sale is compensated by after sales service.
The Sony TVs we had in 90s/2000 lasted for 20 years where as the current lot of TVs give issues after a few years. The same for other home appliances. This year we had to replace both the TV/ washing machine in our native. I see many instances of the same in Team-BHP TV/ home appliance thread too.

[Mahesh Babu]

Originally Posted by vaibhav_a_a

Wish there was - pls see notes under ''basic'' and ''advanced'' buckets

https://www.basunivesh.com/fixed-fee...ngalore-india/

As Smartcat rightly pointed out, they are trying to assess your "Liquid Networth" to decide on what you ought to pay them, in other words the quantum of assets they would be advising you on. This appears very logical since it would not be prudent on their part to charge you a higher slab just because you have a self-occupied house or large PPF/EPF corpus which they can't advise you to liquidate.

[am1m]

Originally Posted by PatienceWins

The Sony TVs we had in 90s/2000 lasted for 20 years...This year we had to replace both the TV/ washing machine in our native.

Might be a voltage fluctuation, brownout issue, quite common in smaller towns, stabilizers might help.

Also, when it comes to clothes and appliances, buying a good quality brand is initially more expensive, but saves you in the long run. A couple of family members bought a TV at the same time as we did. We bought a Sony, they went for a considerably cheaper Chinese-rebrand, bigger and at a lower price. But we're still using that TV more than 10 years later, they've changed TVs twice so far because of issues.

I agree that in my case, lifestyle expenses post-retirement might easily be lesser. Heck, even now I am using the same phone for the past 6 years. I would be very happy to continue using it for another 4, it's perfectly fine for my usage. But a couple of office apps will probably stop being supported soon, so I'll be forced to upgrade. Such a stupid reason to chuck a perfectly good phone. Mandatory lifestyle 'upgrades' like that shouldn't be a consideration post-retirement, I guess/hope.

[callvvijay]

Folks, Need some advice/suggestions here. Please help.

My dad had invested in a HDFC ULIP policy (HDFC Life Personal Pension Plus) - in which he had been paying a premium of say, x-thousand every year for the past 8 years.

Though the policy's premium paying term (PPT) is 10 years, we realize that it was a mistake to have put the money in this policy and hence want to stop the future payments and get back the money invested.

Now, when we enquired with HDFC Life, we were told that there is no way to get the surrender value as it is - and that, we have to convert this into an Annuity plan only. The following are options given to us

1. Invest the whole accrued amount (which is actually the very same as what he had invested over the 8 years - x-thousand * 8)
2. Get 1/3rd of it as lumpsum and invest the remaining in annuity

We are told that we can surrender and get back the amount ONLY after at least 2 years of getting the annuity. However, this is no where mentioned in the policy document. When asked about the same, we are told that, we will be given a new Annuity policy document once we close this and it would be mentioned in that document.

Questions:
1. Is this the way the policy works?
2. What would be the right course of action here? My thought is to go with the option#2 here

P.S: We realized that investing in this policy is a mistake after investing and hence, we could not go back. Now, please do not start the topic on "Why did you do?" part. Need your help on coming out of this with relatively lesser loss.

Thanks!

[SmartCat]

Originally Posted by callvvijay

1. Is this the way the policy works? 2. What would be the right course of action here? My thought is to go with the option#2 here. Need your help on coming out of this with relatively lesser loss.

The insurance scams (I mean, schemes) are designed to discourage early redemptions. The right course of action is to stay the course. Paying the premium for the next 2 years and sticking with the policy according to the terms offers the best returns.

1. Invest the whole accrued amount (which is actually the very same as what he had invested over the 8 years - x-thousand * 8). 2. Get 1/3rd of it as lumpsum and invest the remaining in annuity

Of the two, the 2nd option is obviously better, but that's assuming I understood (1) and (2) properly. But both are bad choices because you are losing the interest or capital gains made over the past 8 years

My dad had invested in a HDFC ULIP policy (HDFC Life Personal Pension Plus). we realize that it was a mistake to have put the money in this policy and hence want to stop the future payments and get back the money invested. P.S: We realized that investing in this policy is a mistake after investing and hence, we could not go back. Now, please do not start the topic on "Why did you do?" part.

Why did you people do this? why? why?

Relax. These ULIP/pension policies/annuities schemes are NOT so bad as people imagine either. Sure, compared to mutual funds, you will be paying:

- higher management fees (expense ratio)
- commissions to the gentlemen who sold this policy to your dad (usually for a small percentage of premium paid every year, for 10 years).

But the biggest advantage is that your money is held in prison for XX years, which you won't be able to take out. Compounding effect over such a long period can result in large payoffs at the end, despite the higher charges. The maturity amount is tax free too I think, unlike a mutual fund.
-

[Aviator_guy]

Originally Posted by callvvijay

Folks, Need some advice/suggestions here. Please help.

My dad had invested in a HDFC ULIP policy (HDFC Life Personal Pension Plus) - in which he had been paying a premium of say, x-thousand every year for the past 8 years.

Though the policy's premium paying term (PPT) is 10 years, we realize that it was a mistake to have put the money in this policy and hence want to stop the future payments and get back the money invested.

Originally Posted by SmartCat

The insurance scams (I mean, schemes) are designed to discourage early redemptions. The right course of action is to stay the course. Paying the premium for the next 2 years and sticking with the policy according to the terms offers the best returns.

Usually the best option is to stay put if you have already paid for so many years. What are the benefits of premature closure vs. at maturity ?

A word of advice : ULIPs have higher front loading, means more commission towards beginning of the policy which tapers down as policy matures. Your agent already received a healthy cut so you won't lose much in commission now by continuing the policy. Don't make a mistake of terminating it towards the fag end without proper rational, otherwise you are giving insurance company another chance to make money at your expense.

[callvvijay]

Originally Posted by SmartCat

The insurance scams (I mean, schemes) are designed to discourage early redemptions. The right course of action is to stay the course. Paying the premium for the next 2 years and sticking with the policy according to the terms offers the best returns.

But the biggest advantage is that your money is held in prison for XX years, which you won't be able to take out. Compounding effect over such a long period can result in large payoffs at the end, despite the higher charges. The maturity amount is tax free too I think, unlike a mutual fund.
-

Originally Posted by Aviator_guy

Usually the best option is to stay put if you have already paid for so many years. What are the benefits of premature closure vs. at maturity ?

Thanks a lot, both of you!

One point I wish to add here - there is NO maturity benefit in this policy. Only, annuity and death cover.

As I had said before, we are told that we can close and get the surrender benefit (after 2 years of getting the annuity). However, the surrender value is quite low than what we had invested - which, as you both have mentioned, prompts us to not go for.

[rx100]

Originally Posted by callvvijay

One point I wish to add here - there is NO maturity benefit in this policy. Only, annuity and death cover.

So this is not a ULIP plan rather an annuity plan similar to the LIC ones. Usually there will be a bonus issued along with the amount paid, and may be there is no bonus if surrendered prematurely.

[Fx14]

Originally Posted by callvvijay

we realize that it was a mistake to have put the money in this policy and hence want to -- get back the money invested.

In view of your objective, best approach could be:

1. Withdraw 1/3rd as lumpsum
2. Invest the remaining amount in annuity under the option with "Return of Purchase Price" on death of the policy holder.

For your mental satisfaction, treat the second point as if you placed the money in a Bank FD and are receiving monthly payments of the interest.

[akhil_007]

Any recommendations for a good wealth management firm for a "Recent" Senior Citizen? He was blessed with a huge windfall recently(mid 8 figure). The said gentleman would prefer hands-off approach with on-demand/planned touchpoints with wealth managers. He would continue to work, on contract and draw salary.

Few of the key needs are:
-To have a monthly payout similar to salary
-Preservation of wealth - to prevent relatives/friends from sponging off his money by smooth talks. And also from the wealth management company itself
-Good Growth on Capital

Not very keen to approach banks because one bad experience. SBI branch redirected him to "SBI Life" and "SBI Mutual fund" guy who was masquerading as SBI Bank employee. He suggested ULIP's, Insurance, Mutual Funds, Endowment Plans and what not!!

Thanks in advance

[callvvijay]

Originally Posted by SmartCat

But the biggest advantage is that your money is held in prison for XX years

Originally Posted by Aviator_guy

Usually the best option is to stay put if you have already paid for so many years. What are the benefits of premature closure vs. at maturity ?
A word of advice : ULIPs have higher front loading

Originally Posted by rx100

So this is not a ULIP plan rather an annuity plan similar to the LIC ones. Usually there will be a bonus issued

Originally Posted by Fx14

For your mental satisfaction, treat the second point as if you placed the money in a Bank FD and are receiving monthly payments of the interest.

Thank you everyone for your advice!

Yes., I realize that it is not a ULIP - but an annuity plan. And, as you folks rightly said, we also see that the amount vested is quite high if we complete the entire tenure (of 10 years) - thanks to the bonus.

We have now decided to pay the remaining 2 premiums as well.

On last Saturday when my dad and I went to the HDFC Life office, we were leaning towards closing the policy. And, then it occurred to me to check with the experts in this forum - and that made the whole difference. Thanks again!

Cheers!

[Aviator_guy]

Originally Posted by callvvijay

On last Saturday when my dad and I went to the HDFC Life office, we were leaning towards closing the policy. And, then it occurred to me to check with the experts in this forum - and that made the whole difference. Thanks again!

Cheers!

Glad it worked out for you.

By the way, on lighter note : we should be cautious when bank or insurance company agrees to our request, without question, to close or cancel any policy/product. If they are not objecting, may be it's not worth canceling for us