Easing the financial journey if you are retired & have dependents to support

While there is no dearth of literature on the financial woes faced by senior citizens, there is hardly any acknowledgement for the tribulations faced by those who are in their golden years and who have to provide for their children or grandchildren.

Tiasha Sen (name changed) is a nine-year-old girl who lives with her grandparents in Kolkata. A student of Class 1 at one of the leading private schools in the city, Sen had to witness the brutal tragedy of being orphaned last year when her parents succumbed to COVID during the second wave of the pandemic in India. Since then, Sen has been living with her maternal grandparents who remain her only caregivers in the aftermath of the death of her parents.

If you have the responsibility of your grandkids then you should invest in equity MFs for their education

“Tiasha’s mother was our only child. She and her husband died within days of each other. Tiasha’s father’s family was incapable of taking full responsibility of her after the deaths. She has been living with us since then. As grandparents, Tiasha has given us a new lease of life after we lost our daughter and son-in-law but given the stage of lives that my wife and I are in right now, we feel a constant sense of anxiety about Tiasha’s future,” narrates Krishnendu Mukherjee, Sen’s 70 year-old grandfather.

Since time immemorial, family structures in India have been such that family members have been the most reliable support systems for individuals during times of distress. While the prevalence of the joint family system may have eroded in the last few decades, family ties are still considered as safety nets in times of need. Sen’s situation is an example of the family as an institution stepping in instead of the state to take care of her as opposed to other countries where the state steps in as a caregiver for citizens who may not be capable of taking care of themselves. In India owing to this apparatus, aging people living with their adult children under their aegis is a common sight but senior citizens who have children or grandchildren dependent on them are not unheard of either. While there is no dearth of literature on the financial woes faced by senior citizens, there is hardly any acknowledgement for the tribulations faced by those who are in their golden years and who have to provide for their children or grandchildren.

“When people invest for their retirement years, they do so with the assumption that their children would be well-settled by then and they would be able to take care of their own offspring to the best of their abilities. Nobody plans their post retirement finances thinking that a cruel intervention by fate would leave the family shattered and that they would have to become providers and caregivers again that too unexpectedly for young children. What makes things worse is that there was no way we could have been prepared for a situation like this,” rues Mukherjee.

A retired government officer, Mukherjee and his wife were able to maintain a comfortable lifestyle prior to the tragedy. Ever since their granddaughter became the couple’s responsibility, they are still coming to terms with the realization that it is not just the increase in current expenses that they have to deal with given their limited retirement incomes but they also needed to save and invest for Tiasha’s future. “We cannot talk about the financial upheaval we have been facing simply because in all likelihood people will misconstrue it as us complaining about having to cut corners for our granddaughter. There is a stigma attached to it, I feel. But our comforts are the least of my worries and what scares me is that I won’t be able to give my granddaughter the comforts that she deserves or what her parents would have been able to give her if they were alive,” he says.

Mukherjee found himself having to revamp his financial management approaches overnight to accommodate his new responsibilities as a caregiver for his granddaughter. “I have started actively investing in mutual funds now because I know now that I have more financial goals to fulfill than what I had initially planned for and fixed income investments would not be sufficient. I have chosen a mix of hybrid funds and large cap equity funds for Tiasha’s education and maintain a trove of debt funds investments for short and medium term needs. SIPs afford me tremendous ease and flexibility because my current situation does not allow me to invest in instruments where I have to dump lump sums to start investing,” he explains.

Preeti Zende, co-founder of Apna Dhan Financial Services says, “Retirement can be a beautiful phase of life where you have the liberty to fulfill your dreams and wishes which you were not able to achieve due to time and money constraints. Now, as all your financial responsibilities are over with maybe your spouse being the only person who is financially dependent on you, you can spend money on your aspirations. But not all senior citizens are equally fortunate - some may still have financial responsibilities towards their kids if they are still studying, or do not have sufficient incomes or are ill or are differently abled. Sometimes they may have to shoulder the responsibility of their grandchildren due to the sudden demise of their kids or a medical emergency. In such cases they need to manage their money well so that they take care of their dependents out of their retirement kitty.”

Zende opines that the bucket strategy can be helpful in such cases. “You can divide your retirement kitty into three parts. The first part will take care of your monthly expenses as well as some ad-hoc expenses. This money should be parked only in the debt asset class. You can use liquid funds, money market funds or ultra-short term debt funds. You can also invest in government schemes such as Pradhan Mantri Vaya Vandana Yojana, Senior Citizens Savings Scheme or Post Office Monthly Income Scheme for regular monthly income.”

Explaining further, Zende says, “For medium term goals, the money can be parked in hybrid funds as well as arbitrage funds. If you have the responsibility of your grandkids then you should invest in equity MFs for their education. You can use index funds or flexi cap funds for the same. If you are legal guardian for your grandkids then you can get Public Provident Fund and Sukanya Samriddhi Yojana accounts.”

Key takeaways

· Make sure that you have adequate health insurance for you as well as your loved ones and maintain a separate fund, if possible for any unexpected medical expenses. A good term insurance plan will provide a requisite safety net to your dependents in the unfortunate event of your demise.

· Update your nominations in all your financial plans and you will too to ensure that your dependents are included in them. In case you don’t have a will, get one made at the earliest.

· For medium term goals, the money can be parked in hybrid funds as well as arbitrage funds.

· If you are legal guardian for your grandkids then you can get Public Provident Fund and Sukanya Samriddhi Yojana accounts.

This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.