Why individuals should buy health insurance in their 30s

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There has always been a great emphasis on insuring oneself with a comprehensive healthcare scheme early in life. Besides sedentary lifestyle, mounting mental pressure health issues, the covid-19 pandemic has made it imperative to have a health insurance plan irrespective of one’s age.

We take a look at some of the essential reasons why individuals should have health insurance in their thirties.

Naval Goel, Founder & CEO, PolicyX.com, said, “Indeed, taking a health insurance plan early in life helps in saving extra premium, but at the same time, there are a lot more benefits that a customer signing before 30 years of under a health insurance program can extract. The biggest benefit is that the long waiting period imposed on various treatments gets over by the time an insured need. This means they can take the leverage of their health insurance completely by the age of 40s.”

The pandemic has forced health insurance service providers to turn stricter with their underwriting. People who are older tend to show health complications have higher chances of rejection these days. A person under the age of 30 years is generally considered healthy has zero chances for application rejection.

Sanjiv Bajaj, joint chairman MD, Bajaj Capital, said, “If you are young healthy, do not delay about buying a health insurance policy. A youngster should not wait to get older or get any chronic illness as it makes sense to buy a health policy when you are young. Many youngsters consider buying health cover when they get old.” Bajaj further said, “By the time one is a middle-aged person, there could be medical conditions such as high blood pressure, diabetes, etc. may also get a limited cover. The younger you are, the lower the policy premium, you can buy a policy with a higher sum insured. It makes sense to buy coverage of around 20 to 25 lakh, considering the health inflation in these times. For small families, there is an option to buy a Family Floater plan wherein all individuals of the family can get insured.”

Along with being secure from a health perspective, timely buying of health insurance policy also helps in better financial planning by saving some amount of tax ensuring that your savings are untouched at the time of health emergencies, said Goel.

Thus, if you are without a health insurance policy, you are putting your savings in jeopardy. It is crucial to have suitable coverage for yourself your family members. You can choose the sum insured as per your affordability. You must also know that for every no-claim year, your sum insured keeps increasing up until the no-claim bonus kicks in.

Further, adhering to the rules that pre-existing diseases will be treated after 3-4 years, after 8 years your claims can be rejected, you must understthat health insurance is a long-term buy product. Hence, it is always better to buy a health policy early with a sufficient sum insured for oneself family members .

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How to estimate a future rate of return on your retirement savings

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A critically important question. Many preretirees can do an adequate job of estimating what their expenses will look like after they leave the office. But predictions about our income largely depend on how our investments will perform. And here, most of us draw a blank. After all, it’s difficult enough to forecast what markets will do in the short term, never mind over the course of a 30-year retirement.

So, let me suggest three ways to estimate a future rate of return: two simple ways—a better way.

One simple way is to use historical returns. The good news: We have almost 100 years of data to work with. And these figures tell us that stocks, on average, return about 10% annually that intermediate-term bonds return about 5%.

Even better, we can, should, adjust these figures for inflation calculate a “real” rate of return, a more accurate measure of how the value of an investment is rising or falling. Given that inflation has averaged about 3% annually since the early 1900s, the real rate of return on stocks bonds, respectively, is closer to 7% 2%.

The bad news: This approach is a bit too simple. It doesn’t account, for instance, for the above-average returns that stocks have given us during the past dozen years; as such, many economists anticipate lower returns from stocks in the years ahead.

So, speaking of economists…a second way to estimate returns is to look at what the experts are projecting. Each year, several major financial firms—BlackRock, JPMorgan Vanguard, among others—forecast long-term returns for various asset classes. You simply can use their numbers in your retirement calculators.

(Note: Christine Benz, director of personal finance at researcher Morningstar Inc., one of our favorite writers about retirement planning, thoughtfully compiles several of these forecasts in a single article each year. Her most recent survey was published in January. Registration may be required.)

Vanguard currently estimates that annual returns for U.S. equities in the next decade will average between 2.4% 4.4%, that returns for bonds will average 1.4% to 2.4%.

Be careful here: Some firms project returns for the next decade; others will look 20 or 30 years into the future. BlackRock, for example, in its latest projections, expects large-cap stocks to return about 7% annually over the next 20 years bonds to return about 2.4%.

Finally, a better way to forecast returns is to sit down with a financial adviser who, ideally, can dig into this topic into your particular nest egg. Among the issues you your adviser should tackle:

What are the possible returns for the various asset classes in your portfolio (say, for small-cap stocks or international bonds)? Are returns calculated with dividends, or without? Will your adviser’s calculations be based on average annual returns in the future, or on compound returns?

And what do best-case worst-case scenarios look like? For instance, from 2000 through 2010, the S&P 500 returned, on average, less than 1% a year. Yes, that’s a relatively short time period. But who’s to say that we won’t see multiple decades of low returns.

I realize that you’re looking simply for a number to plug into a calculator. And that’s fine. But please recognize that the forecasting business, even as practiced by the experts, is inexact, at best. Not to mention exceedingly complicated. (If you wish, you can explore concepts like the Gordon Equation or CAPE, economist Robert Shiller’s cyclically adjusted price-to-earnings ratio.)

The point: I hope, at some point, that you, a capable adviser, are able to give your particular question the attention it deserves.

How long do I have to work to get the maximum benefit from Social Security when I retire?

As is often the case with Social Security, there’s more than one way to look at this issue.

Your benefit will be based on your highest 35 years of earnings that are covered by the Social Security program. (And, if you’re interested, each year’s pay is indexed for inflation.) So if you work for at least 35 years—if, in each of those years, you earn or exceed the maximum amount of pay subject to Social Security taxation—you will get the top benefit.

To be specific: A person retiring this year at the full-retirement age of 66 two months—meeting the requirements outlined above—would receive an initial monthly benefit of $3,148. And, in 2021, the maximum taxable income is $142,800.

That’s the first answer to this question. There’s a second answer, as well.

If you delay claiming Social Security until age 70, you earn “delayed retirement credits,” which pump up the benefit you eventually receive by 8% a year. In 2021, a person who first claims Social Security at age 70—and, again, who met the requirements discussed above—would receive $3,895 a month, the maximum benefit.

Mr. Ruffenach is a former reporter editor for The Wall Street Journal. Ask Encore looks at financial issues for those thinking about, planning living their retirement. 

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You shouldn’t expect profits from these investments

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NEW DELHI :

The fundamental purpose of investing is to fulfil financial goals create wealth. However, not all investments are meant to generate profits. We tell you three important investment avenues where returns don’t matter.

Life insurance: The essence of life insurance is that in the case of your death, the insurance company will pay your family a set amount that will help them tide over the financial difficulty arising out of your death. If you survive the term of the policy, you or your family get nothing.

The desire to earn something out of the insurance premiums you will pay to the insurance company may prompt you to buy traditional plans. It’s a bad investment choice as traditional plans neither provide adequate insurance coverage to your family nor do they offer sizeable returns. A money back policy delivers a paltry 4.5-6% through the 20-year policy term. It is recommended that you buy a pure vanilla term policy for your life insurance needs.

Emergency fund: An emergency fund is supposed to act as a buffer for unplanned scenarios, such as a job loss or a medical emergency. The purpose of setting up such a fund is to get easy access to liquid money, as an emergency always strikes unannounced.

For this reason, the decision about which instrument you should pick to park your contingency corpus should be a function of how secure liquid that avenue is not how much return it will earn. Parking this money in equity or even a debt mutual fund might erode some of its value in the short term during a market downturn.

A savings bank account, liquid fund or ultra-short term debt fund are the best avenues to build your emergency corpus. These options are low on risk highly liquid. While a bank deposit is completely risk-free, the money will be right in front of you, which might tempt you to spend from it on things other than an emergency. A liquid fund or an ultra-short term debt fund takes care of this. It locks the money away from your sight, while providing liquidity of that a savings account.

Gold jewellery: Gold is a good option to include in one’s investment portfolio. But, doing so in the jewellery form is a bad investment choice.

Gold jewellery holds sentimental value you are unlikely to sell it to meet a future financial goal. If you do sell it, you’ll aspire to buy jewellery in its place sometime in the future. Besides, selling jewellery eats away into the ornament’s value in the form of making wastage charges, which can add up to 10-30%.

Gold bonds, digital gold gold exchange-traded funds (ETFs) are a better way to include gold in your investment portfolio.

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You don’t have to memorize 16-digit debit, credit card numbers. New RBI rules here

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The Reserve Bank of India (RBI) has enhanced the guidelines on card tokenisation services in order to ensure that the consumers are least susceptible to frauds their card transactions remain secure. The central bank refused to extend its deadline for card tokenisation beyond the 1 January 2022 date.

While non-cash transactions simplify processes save time effort, they also make you susceptible to fraud.

In a release, RBI said the device-based tokenisation framework advised vide circulars of January 2019 August 2021 has been extended to Card-on-Fite Tokenisation (CoFT) services as well.

Card-on-file refers to card information stored by payment gateway merchants to process future transactions.

“…card issuers have been permitted to offer card tokenisation services as token service providers. The tokenisation of card data shall be done with explicit customer consent requiring additional factor of authentication (AFA),” the RBI said in a statement 

What is tokenisation

When you use your card, debit or credit, for a transaction, the execution of the transaction is based on information like the 16-digit card number, the card expiry date, the CVV as well as the one-time password or transaction PIN. In fact, a transaction is successful only if all of these variables are entered correctly for a specific transaction. Tokenisation refers to replacement of actual card details with a unique alternate code called the “token”. This token is unique for each combination of card, token requestor device.

How secure is the token?

Merchants process millions of card transactions in a day. At the check-out, many of these merchants give you the option to save the card number, there is a risk of these saved details getting compromised. 

When the card details are saved in an encrypted manner, the risk of fraud or compromised data gets reduced. To, put it simply, your risk gets reduced when you share the details of your debit/credit card in the form of a token.

“In fact, some merchants force their customers to store card details. Availability of such details with a large number of merchants substantially increases the risk of card data being stolen. In the recent past, there were incidents where card data stored by some merchants have been compromised/leaked. Any leakage of CoF data can have serious repercussions because many jurisdictions do not require an AFA for card transactions. Stolen card data can also be used to perpetrate frauds within India through social engineering techniques,” RBI said in its release.

The central bank further added that there will be no requirement to input card details for every transaction under the tokenisation arrangement

“Contrary to some concerns expressed In certain sections of the media, there would be no requirement to input card details for every transaction under the tokenisation arrangement. The efforts of Reserve Bank to deepen digital payments in India make such payments safe efficient shall continue,” RBI release noted.

The initiative is expected to make card transactions more safe, secure convenient for the users

RBI had last month had extended the scope of ‘tokenisation’ card payment services to several consumer devices including laptops, desktops, wearables like wristwatches, bands Internet of Things (IoT), in addition to mobile phones tablets

In January 2019 the RBI had issued guidelines on “Tokenisation – Card transactions”, permitting authorised card networks to offer card tokenisation services to any token requestor, subject to conditions. On a request from the industry, it extended the deadline to end-December 2021 as a one-time measure.

 

 

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How much tax do you pay on debt investments?

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Any portfolio should have a balanced mix of asset classes. Diversification helps reduce the overall risk. For instance, equity investments tend to give higher returns than all other asset classes over the long run, but they are also riskier.

To balance that, one must invest in debt-related products. While these too carry some risk, they are considered safer. Also pay heed to the taxation rules to know what the net returns would be. Any change in rules can affect the reason why you had invested in the product.

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