Life doesn’t stop at sixty and no longer do the senior citizens fit into the Shakespearean description of the seventh age of man: "Second childishness and mere oblivion, sans teeth, sans eyes, sans taste, sans everything."
With longer life spans, disintegration of joint family system and fewer guaranteed return products, senior citizens face some unique challenges.
Investment requirement is a ‘Tri’-pod
Gaurav Mashruwala, Founder ACE says, “Once a person retires, his requirements are in the form of a tripod, a three legged stool. The first leg is liquidity for contingency, second leg is the growth of capital at a higher rate than the inflation and the last leg is regular income. To prevent the stool from toppling it is required to have a right mix of different types of investments that can meet these needs.”
Mukund Seshadri of M.S. Ventures shares the same opinion and says, “Today the concept of old age could span from the age of 50 to almost 80 depending upon the average age of mortality. This leads to various requirements. The immediate ones being: security and constant cash flows.”
In order to meet those economic needs the foremost requirement is to have a goal based plan in place.
No blind rules to be followed
To meet the regular income needs, senior citizens often end up putting all their money into a fixed deposit. But, that might turn counterproductive.
Appreciation of money is vital which can be done by choosing the correct asset class. Their nest-egg cannot be allowed to be eaten up by the monster of inflation. So, advising a debt fund to meet short term needs is a narrow approach.
“In certain cases a grandfather might like to save money for his two year old grandson and in that scenario equity fund which is better adjusted to inflation based returns might be the right product in long term,” says Mukund.
Advising and planning right
With investment options increasing and risk management becoming an integral part of financial planning, a single product or instrument may not do the job for all. Before choosing any product, one needs to evaluate the cash needs, the time horizon for the investment, and above all, the ability to take risk for retirees.
“Investing in savings account would give liquidity but no growth. Large-cap funds, stocks and gold can help in the growth of capital but no surety of regular income. A post office scheme can offer a regular income but liquidity might go for a toss,” says Mashruwala.
Hand holding required
Senior citizens are more dependent on their investments and savings for their survival than any other group. It is natural then that any change in interest rates and stock market fluctuations affect them emotionally. Advisors would do well to recognize this.
By updating their senior citizen clients on market changes on a regular basis, advisors can mitigate their concerns.
Opportunity to educate
Research shows that senior citizens do not lose the zeal to learn new things. With more leisure time, senior citizens are more open to learning about finances and investments. When you invest your time educating them, you are not only helping them make better choices but also earning their trust and respect.
When you deal with senior citizens, you take on the responsibility of their life-long savings. Sensitivity, care and due diligence are the real mantras of success here.
