50, Worried About Healthcare Costs: Can I Retire Safely?

Dear experts, I’m 50 now and I want to retire by the age of 60. I have saved ₹70 lakhs in mutual funds (split across equity and hybrid funds), ₹15 lakhs in PPF, and ₹10 lakhs in NPS. While I’m focused on building my retirement corpus, healthcare costs worry me. Both my parents had chronic illnesses that required expensive long-term care, and healthcare inflation is a significant concern. I currently have a ₹10 lakh health insurance policy through my employer, but I’m unsure if this will suffice post-retirement. Should I consider a super top-up plan or invest in health-focused mutual funds? Are there health plans designed specifically for retirees? How can I ensure my retirement savings are protected from unexpected medical expenses?

Ans: You're taking a prudent approach by planning for healthcare costs in retirement. Given your concerns, here’s how you can protect your retirement savings from unexpected medical expenses:
1. Enhance Your Health Insurance Coverage
Since your employer-provided Rs 10 lakh health insurance will likely end when you retire, it's crucial to secure independent coverage. Consider the following:
• Super Top-up Plan: A cost-effective way to increase your coverage. For example, you can take a Rs 25-Rs 50 lakh super top-up plan with a Rs 5-Rs 10 lakh deductible.
• Standalone Family Floater or Individual Health Insurance: Purchase a comprehensive plan for at least Rs 20-Rs 30 lakh.
• Senior Citizen Health Insurance: Some insurers offer specific plans for retirees, but these often come with higher premiums and limitations. It's better to buy a policy before you turn 55.
2. Create a Medical Emergency Fund
Set aside Rs 10-Rs 15 lakh in a liquid or ultra-short-duration mutual fund for unforeseen medical costs not covered by insurance.
3. Invest in a Health-Focused Mutual Fund?
Rather than investing specifically in a health-focused mutual fund (which is sector-specific and volatile), focus on:
• Multi-asset funds or balanced advantage funds that provide stability.
• Senior Citizen Savings Scheme (SCSS) for a secure income stream post-retirement.
• Debt mutual funds or fixed deposits for liquidity.
4. Long-Term Care Planning
• Consider critical illness insurance (covers conditions like cancer, stroke, and heart disease) as a lump sum benefit.
• Evaluate home healthcare plans that cover domiciliary hospitalization and elder care services.
Action Plan for the Next 10 Years
1. Buy a comprehensive health insurance policy (Rs 20-Rs 30 lakh) + a super top-up now.
2. Build a dedicated healthcare fund (Rs 10-Rs 15 lakh in safe instruments).
3. Diversify retirement savings—increase SIPs if possible and allocate some funds to low-risk options like SCSS or debt funds.
4. Consider critical illness insurance before you turn 55.

Ans: Appreciate your clarity and goal-setting at 42.
You’ve already taken good steps.
You have EPF, PPF, Sukanya, liquid fund, home loan and regular income.
These reflect discipline and future focus.
Your daughter’s future and your early retirement both can be managed well.

Now let’s give a complete plan.
A clear strategy across retirement, child goals, insurance, and debt is needed.

? Assessing your current financial picture

– You are 42 now
– You want to retire by 55
– So you have 13 more working years

– Take-home income: Rs. 1.5 lakh monthly
– Home loan EMI: Rs. 29,580
– Living expenses: Rs. 90,000

– Current monthly surplus is around Rs. 30,000
– That’s a good starting point

– Existing assets:
– EPF: Rs. 8 lakh
– PPF: Rs. 4 lakh
– Sukanya: Rs. 5 lakh
– Liquid fund: Rs. 10 lakh

– This gives you about Rs. 27 lakh accumulated wealth
– You also have regular EMI outgo, which must be planned around

? Understanding the future goals clearly

– You want to retire at 55
– That means you will live 30–35 years post-retirement
– So you need monthly income for 3 decades after 55

– Your daughter will need funds for:
– Higher education (around age 18–21)
– Marriage (could be after age 25)

– These 3 are major financial goals
– All need separate planning

– Mixing all goals in one portfolio will dilute focus
– Keep clear buckets for each goal

? Managing your home loan and EMI

– You pay Rs. 29,580 EMI monthly
– This is about 20% of income
– It is manageable, but restricts free cash

– Try to close this loan before retirement
– Don't carry home loan into retirement years

– If loan ends by age 55, good
– If not, plan prepayment using bonus or surplus

– Don’t divert long-term investments to close loan
– Use only low-return assets like liquid funds if needed

? Health insurance for you and your wife

– Medical cost is rising every year
– Do not depend on employer cover alone

– Take separate family floater plan
– Go for at least Rs. 15–20 lakh cover

– Include Rs. 5 lakh base with super top-up of Rs. 15 lakh
– This gives big cover at lower cost

– Buy from insurer with smooth claim track record
– Don’t chase lowest premium

– Also get personal accident cover separately
– This helps protect your family in case of disability

– If either of you has existing health conditions, disclose fully
– Avoid hiding any medical history during policy purchase

– A Certified Financial Planner can help in insurer comparison

? Retirement planning from age 42 to 55

– You have 13 years to build retirement fund
– This is your wealth creation window

– Use mutual funds as main investment engine
– Only actively managed mutual funds, not index funds

– Index funds are passive, just mirror the market
– They offer no protection in market fall

– Active funds are run by fund managers
– They manage risk, select better stocks, and aim for alpha

– Invest through regular plans only, not direct funds
– Direct plans skip the Certified Financial Planner’s expertise
– No regular reviews, no rebalancing, no correction

– Regular plans give personal guidance, goal tracking, and 360-degree care

– Start monthly SIP in 4–5 good actively managed funds
– Choose funds from:
– Flexicap
– Large and midcap
– Midcap
– Hybrid equity

– Begin with your current surplus of Rs. 30,000 per month
– Gradually increase it yearly with income growth

– From age 50, shift gradually to hybrid and balanced funds
– Reduce equity exposure closer to age 55
– This protects capital from short-term fall before retirement

– At 55, use SWP to withdraw monthly income
– SWP is tax-efficient and flexible
– Avoid annuity, it gives poor returns and locks funds

? Planning for daughter’s education and marriage

– Sukanya Samriddhi is a good long-term product
– You already have Rs. 5 lakh in it
– Keep contributing regularly till she turns 15

– It matures when she turns 21
– Use this mainly for her marriage

– For education, mutual funds will help more
– Education need will come earlier than Sukanya maturity

– Start a separate mutual fund SIP for higher education
– Allocate Rs. 10,000–15,000 monthly if possible
– Use high-growth active funds for this

– Don’t mix this with your retirement corpus
– Separate goal ensures clear tracking and timely fund availability

– Rebalance yearly with help of Certified Financial Planner
– Reduce equity exposure 2–3 years before education need

– Also, consider education loan later if needed
– It gives tax benefits and keeps your wealth intact

? Utilising your liquid fund wisely

– You have Rs. 10 lakh in liquid funds
– Liquid fund is not for long-term goals

– Use this as emergency fund and goal starter
– Keep 6 months of expenses aside for emergencies

– Remaining portion can be moved to mutual funds gradually
– Start STP (Systematic Transfer Plan) into active equity funds

– This avoids risk of investing large lump sum at one time
– STP spreads entry over months and reduces timing risk

? Using EPF and PPF efficiently

– EPF will grow steadily till retirement
– Don’t withdraw it early

– It gives safe and tax-free growth
– Consider it as part of your retirement base corpus

– PPF is good for stability
– But its returns are lower than mutual funds

– Use PPF more for conservative wealth
– But not for aggressive corpus creation

– Maintain it but focus more on mutual funds for wealth growth

? Avoid mixing insurance with investments

– If you have any LIC, ULIP or endowment policies
– Assess their performance carefully

– If returns are poor, consider surrendering them
– Use surrender value to invest in mutual funds

– Insurance and investment should never be combined
– They serve very different purposes

– Take only term insurance for life cover
– Invest separately in mutual funds for growth

? Tax planning and optimisation

– Mutual funds have new taxation rules
– For equity mutual funds:
– LTCG above Rs. 1.25 lakh taxed at 12.5%
– STCG taxed at 20%

– For debt funds:
– Gains taxed as per your income tax slab

– Plan your withdrawals smartly post-retirement
– Use SWP method to optimise tax hit

– Also claim deductions under 80C, 80D and 24(b) smartly each year

– Review tax-saving investments with a Certified Financial Planner yearly

? Build a disciplined review habit

– Review all investments once every year
– Track goal progress, not just fund return

– Don’t panic in market corrections
– Stay focused on long-term growth

– Rebalance portfolio every year
– Reduce risk gradually when goal is near

– Stay invested and stick to your plan

– Avoid frequent changes or chasing returns

? Finally

– You have strong income, savings and structure
– With guidance, all your goals are possible

– Focus SIPs for retirement and child education
– Use Sukanya only for marriage

– Clear loan before retirement
– Take strong health insurance

– Avoid direct and index funds
– Stick to regular plans with Certified Financial Planner support

– Stay consistent and review yearly
– Early retirement at 55 with secure future is fully achievable

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment