financial security and planning mid-life planning quality of life

Longevity impact on retirement planning

Thanks for reading! In this newsletter, I try to breakdown longevity impact on planning, and how decisions you make today can have a compounding return on your future life.

Now, let’s dive in!

Retirement planning, and missing pieces

Retirement plans put a smile on everybody’s face. For many that can afford to stop working, it is the culmination of family and work responsibilities, and the start of a new journey. It may result from the natural end of a career (60 to 65 years) or through a planned event (early retirement, etc). Each individual and family plans differently and have a set of different priorities. Some people look forward to it with a fresh set of plans, others intend to spend more time with their family and friends, and some others prefer to take it easy. Without going into nuances, Aegon’s 2015 Retirement Readiness survey points to Indians having a very positive perception of retirement, and a majority are comfortable with their retirement plans.

Over the last decade, one can notice the professionalisation of retirement planning, thanks to more financial products and services, and rise in SEBI registered financial advisers, and this has allowed for investments in market-linked returns adjusted to risk profiles. These options through conventional institutions and new digital platforms, aided by rise in economic opportunities, could be reasons for such optimism among the young. Traditional media and aggregator platforms continue to cover this space through various articles, insights and tools.

A large proportion of older adults in India continue to co-habit homes with their families, and manage their expenses with returns from fixed instruments (FDs, senior citizen schemes, etc) or through pensions and rental income, where available. They have very little wiggle room when it comes to deviation from their planned finances.

With average lifespans rising by almost 10 years in two decades, the impact on longevity on such plans are largely underestimated. While most (retirement) planning calculations work on simple inputs – age of retirement, life expectancy, inflation, expected rate of return, current savings, future expenses, etc, – they also tend to look at life after retirement as a stable set of years with an incremental rise in household/family spend.

Today, it is not difficult to find a bunch of retirement calculators with such simplistic assumptions. The question is, what are they missing?

Health spending, medical debt and out-of-pocket expenditure

According to the LASI study, it is estimated that by 2030, 45% of India’s health burden will be borne by the older population. Low levels of public spending (particularly in geriatric care), longer lifespans, rise in chronic conditions (cardiovascular diseases, hypertension, diabetes etc.) and multiple co-morbidities will further push the cost of healthcare for very many of us.

In 2019-20 alone, 5.5 crore Indians were pushed to poverty by medical debt, which can be attributed to many factors including lack of insurance coverage, limited coverage, high cost of care, medical inflation, etc. The out-of-pocket (OOP) expenditure on health care depends on many factors; household income, type of illness, age, sex, type of health facility and quality of care. OOP expenditure on health stands at a worrying 60-65 percent, the highest in the world. While private sector dominance in healthcare provision in urban India (out-patient care, hospitalization, etc) is well known, lack of serious healthcare/medical regulation is unlikely to bring such expenses down in the near future.

According to this study, the monthly per capita expenditure (MPCE) of elderly households is higher than that of non-elderly households possibly due to higher health spending of elderly households compared to non-elderly households (3 times more).

Impact of medical debt and OOP expenditure can be particularly acute in elderly households and households with elders given their sources of revenue are limited and/or fixed.

Health insurance market, medical inflation and treatment costs

With only 137 million lives covered in FY20, India is also a largely underserved market for health insurance. As per the LASI study, only 18.2% of those aged 60 years have health insurance; it is at 23% for those in 45-59 age group; overall 21% of those aged above 45 years are covered by insurance.

This article highlights the market failure and unimpressive outcomes from opening up the health insurance market more than two decades ago, and the rise in cost of insurance premiums.

Retail health insurance has always followed an ‘age-band pricing’ approach where policyholders in a particular age band pay an identical premium and see their premium jump as they move bands, especially amongst higher age groups. Adding to this is the premium revision by insurers, usually in a block of two-four years to keep pace with medical inflation. These factors together can see premiums jump to as high as 50 percent on renewal leading to large risks of selective lapsing.

Deepti Bhaskaran, ORF Expert Speak

Premium revision linked to medical inflation and age-band pricing can have a particularly negative impact on insurance premiums of older adults. Furthermore, health insurance purchase is an onerous task for older adults without family or professional support. While exclusions for older adults have improved over the years, insurance sales, repurchases and claims processing continues to be a very messy operation, and infrequently regulated by IRDAI.

report by Mercer Marsh Benefits said forecasted medical trend rate will be 10 percent in India, while inflation will be at 5 percent. With respect to the diseases, respondents from Asia (including India) said that increased non-communicable diseases will increase employer-sponsored healthcare costs over the next 3 years. These diseases include heart disease, cancers, stroke, chronic respiratory diseases, diabetes, Alzheimer’s disease, mental illness and kidney diseases.

The cost of healthcare, and particularly medical treatment, has been rising in India, and has particularly accelerated due to the pandemic. Higher hospitalization charges due to covid-related protocols, additional procedures, etc. have been par for the course. It is estimated that the healthcare expenditure will rise two-fold, and form 11% of private consumption expenditure from the current 5% thus sucking away hard-earned rupees away from other expenditure items. While healthcare facilities and access to modern medicine have improved significantly, affordability continues to be a major challenge. For example, a major medical treatment expense can affect a well-planned retirement plan. An expert tracking the space advised purchase of health insurance early on (to avail differential pricing) and a medical treatment corpus as two ways to deal with such emergency situation. There are likely other options to be explored in the context of one’s support system. For example, Beshak’s Critical Illness Handbook provides a deep-dive into insurance options as an independent and unbiased voice of experts, and is thus highly recommended.


In conclusion…

Planning for retirement is different from planning for a better quality of life. Apart from sound financial health and early planning, it is also important to consider options associated with age-linked care assistance (home care services), short- and long-term medical care, alternate living/custodial arrangements, and other later life transitions. While there is no perfect algorithm that can help arrive at the right plan, it is also never too late to ponder over the question, be it 40 or 75!

quality of life Uncategorized

What is the right ‘old age’?

Elderline, longevity, happy ageing and quality of life

Thanks for reading and subscribing to the Silver Angels Newsletter. I cover news focused on the Silver Economy, with a focus on research, media, entrepreneurship and impact. In this newsletter, I attempt to expand the language around ageing in the context of developments over the last three decades, and why retirement age doesn’t define old age.

Let’s dive in!

📣 Language of ageing

The wellbeing of senior citizens is part of the Constitution of India, under Article 41. India came up with its first ever policy centered around well-being of older persons in 1999, also declared the year of older persons by the UN. This policy laid out strategies to improve the quality of life of senior citizens through interventions in areas of financial security, healthcare and nutrition, shelter, continuous education, protection of life and property, and welfare of the programs to the most vulnerable among the older persons. In 2011, a national policy on senior citizens that integrated various services and benefits (pension, travel concession, etc.) to improve access and provisions for seniors was published. Drawing from active international efforts in the space, the policy advocated for dignified life for older adults through ageing-in-place services, financial support for assisted living facilities (old age homes), protection against abuse and neglect, and much more.’

The UN declared 2021-2030 as a decade for healthy ageing, defined as “the process of developing and maintaining the functional ability that enables wellbeing in older age”. It identified four areas for action – age-friendly environments, combatting ageism, integrated care, and long-term care – and this was followed by the WHO’s 2016 global strategy, which lays out an action plan to meet these goals centered around ageing and health. These and many other developments around the world have helped evolve the language around ageing over the past two decades– positive ageing, productive ageing, healthy ageing, happy ageing, active ageing, better ageing – into something more nuanced, relevant and futuristic.

One of the interesting aspects of studying ageing is the evolving language and context of usage, and how it impacts the way we frame a problem or an opportunity. The intergenerational changes further alter the perception around ageing, and strengthen the movement away from the binary of working and retired lives, which is largely a creation of formal workforce arrangements.

In the Indian context, a senior citizen is somebody over the age of 60 and thus acquires special rights under law, is eligible to avail certain entitlements and concessions, and gets credits in the Indian government tax system. A senior citizen dependent is also a tax-saver for a family, as highlighted in the article. Simply put, the definition of a senior citizen influences the financial and non-financial aspects of the elderly in India, and it is all the more relevant in the case of those dependent on the government for basic needs and protection. It is estimated that old age pension covered 28 million individuals across the country in 2019-20, the largest of the three major disbursements under the National Social Assistance Protection (NSAP).

🎈 Age in the context of longevity

Imagine this. The average lifespan of general population in India (longevity) has increased from 62 years in 2000 to almost 70 years in 2018. That is a rise of 8 additional years post the age of 60, termed as the cutoff age for senior citizen qualification!

In short what we have is a single standard cutoff age for a moving average for a population demographic with multiple indices around general wellbeing. You are more likely to see an active 75 year old Indian person raring to make her next youtube video than you did three decades ago.

Now, let us look at a few other countries.

Senior citizens in South Korea are those with a chronological age of 65 years while in the US, it could vary for different provisions and benefits. The federal health insurance (Medicare) kicks in at the age of 65 while getting policies around driving licenses vary from one state to the other, between 64 and 80. Taking a completely different view, Denmark categorizes people between 60 and 80 years into the third age group and those over 80 years into the fourth age group. The paper Think Tank – The 3rd Age from a reputed Danish think tank articulates 7 key challenges and 33 recommendations to develop what it terms as a good life for the third age group. A joint committe of the Japanese geriatrics and gerentology societies proposed to increase the age of elderly to 75 years and above considering those between 65 and 75 years continue to be active and feel uncomfortable being treated as elderly.

In short, there is no universal senior citizen and old age is not defined by one number.

⚡ Marketplace to improve Quality of Life?

It is well identified that a lot of factors contribute to increased life expectancy among general populations including sustained investment in health, education and so on. A developing and emerging country like India measures its progress over time by the improvement in access to basic and essential needs (food, shelter and clothing) of a larger population and improvement in overall standard of living (rights, life expectancy, safety, income equality, environment conditions, etc.). While standard of living comparisons help benchmark globally, they do not necessarily reveal the quality of life among those living longer.

It has been observed that subjective wellbeing is crucial for later life satisfaction and is an important determinant of quality of life. Aside from meeting basic needs, financial security, continuing participation in societal activities, better geriatric care, availability of supportive and assistive devices, better living arrangements and general life satisfaction play a crucial role in enhancing the quality of life among older adults.

Looking at the eldercare market from the perspective of quality of life improvements can help build a vibrant silver economy and a marketplace of reliable services spread across various needs. Affordability and access to such services are going to be key to ensure such improvements reach the next half billion.

Here are three such opportunity areas –

  1. The Alzheimer’s and Related Disorders Society of India (ARDSI)’s 2018 Dementia India Strategy Report estimates 14.3 million Indians with dementia by 2030 and the cost of care to touch 0.5% of the GDP. Given elderly are particularly vulnerable for dementia and other chronic conditions, this space needs better attention given its impact on the quality of life.
  2. In a previous article, I touched upon the transition from one-size-fits-all approach of old age homes to various formats of care and living arrangements, and in another article, about the growing ageing-in-place services in India. These efforts help improve the quality of life of older adults while presenting a clear opportunity for the future.
  3. While the shortage of doctors and nurses in India is well covered, the estimates around demand for caregivers for an ageing population is not fully understood. With global shortage of caregivers for elders, investments in this space can result in disproportionate improvements in quality of life. According to official estimates, Israel, a country of around 9 million, is home to 15000 Indians out of which 13500 are registered caregivers. While the Government, through industry partnerships, has developed certain standards for this industry, this is an area with immense opportunity to create jobs.

🖨 Mainstreamed

Articles from mainstream newspapers and magazines that touch upon the Silver Economy in India, and our short take.

Launch of Elderline by Government of India

The dedicated number 14567, along the lines of similar efforts in the past for children, is operational in UP, MP, Rajasthan, TN, Karnataka & Telengana through public-private partnerships. The service will be rolled out in other states over time and in the first three weeks, received 475 actionable calls seeking emotional support, information on pension, old age homes and other issues.

Eldercare while working from home, blog post in People Matters

“It is much more common and comfortable for people to talk about their children at work than it is to talk about aging and/or ill parents. So you cannot assume that your boss or peers know or understand your situation. Eldercare is also highly unpredictable and can therefore be highly disruptive to your workday. So tell your coworkers about your caregiving status and ask for their compassion during this time.”

These lines resonate across offices everywhere and drive the benefits programs in even the most progressive organizations, undermining the role of employees in the wellbeing of their parents/elders in the family.

Zero-sum game of caregiving by Rahul Desai in Firstpost

In this interesting personal journey, the author ventures into the world of caregiving through characters in three movies, and looks at his future self as possibly being one (or not) for his parents. I will also add the Netflix show, The Kominsky Method, to the mix of movies covered in the article – Solos, The Father, and Dick Johnson Is Dead.

Medical emergencies and lonelineness by Anubhuti Matta in Forbes

Emoha Eldercare, a Gurgaon-based eldercare company with 3500 members, launched a bike-based first responder to attend to accidents, perform CPR and offer first-aid. The company claims to have saved 40 lives through this service, and has also launched active ageing programs online to keep elders engaged.

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