Senior Citizen and How to invest Retirement money?

Before or On retirement the question that one has is how to use the retirement kitty?  You are or will be retired and are looking forward to living a relaxed life. Collecting your pension and provident fund money is work half-done. You have to plan meticulously to not only make your money yield returns that are higher than inflation but also minimise the amount you have to pay as tax. To ensure a regular stream of income, you need to deploy your retirement corpus in the the right products.  We look at the various investment options suited for retirement savings.

A relaxed life after retirement can be achieved by smart financial planning to give you the financial security needed in old age On retirement, an employee normally receives certain retirement benefits. In the year one receives the retirement benefits. Such benefits are taxable under the head ‘Salaries’ as ‘profits in lieu of Salaries’ as provided in section 17(3). However, in respect of some of them, exemption from taxation is granted u/s 10 of the Income Tax Act, either wholly or partly. Please use those.

Planning For Post Retirement

Plan for your retirement by using following steps. Try to be in control of your finances, include your children if you trust them or their spouse. Do not give away your property and assets to your children while you or your spouse is alive. Make a will on how to distribute your financial assets.

Step one of retirement planning is to quantify how much savings one has accumulated before retirement.

To mention few savings: provident fund, gratuity, fixed deposits, shares, term insurance, cash in savings account etc.  Suppose provident fund is Rs 30 Lakhs, Gratuity is Rs 15 lakhs, Fixed Deposit is Rs 5 Lakhs, Share is Rs 3 Lakhs & Term Insurance is Rs 3 Lakhs, cash is Rs 2 Lakhs. Adding up all these savings it amounts to Rs 58 Lakhs. Idea is to quantify how much retirement money does one have? Proper investment of this money has to be done to generate for future.

Step two is to account expenses(monthly and annual)

No matter how judiciously we save there will be some expenses. We can never cut our expenses down to zero. But if we start to dig into our savings ultimately it will get finished. Idea of doing this exercise is to exactly know how much we will need to dig into our retirement money each month.   This is where careful investment of retirement money is important.Target is to generate fixed income without digging into principal amount (retirement money). In our example, adding all expenses, it amounts to Rs 31,500/month.

Step three to see is pension or  annuity enough to take care of your expenses for at least the first few years in retirement?

If not, how much extra income is required? For example, if average monthly expenses is 30,000 and 23,000 is the monthly pension, about 7,000 is the income to be generated from retirement savings. If there is no pension then in our above example retirement savings is Rs 58 Lakhs and monthly expense is Rs 31,500. In order to generate Rs 31,500 per month from savings of Rs 58 lakhs, return @ 6.5% per annum is required.

Step 4: What is your tax slab?

Retirement does not mean the end of income. So, it is important to identify the sources of income on which you have to pay tax. Other than pension, tax is payable on income from property, that is, rent; capital gains (long and short term); and dividend and interest from equity and fixed-income investments. if you are working post retirement then Income from salary is also taxed. In order to minimise tax, invest in products wherein either the yearly outflow or the maturity amount is taxfree. Our article  Senior Citizen : Income and Tax discusses it in detail.

Pension is also taxed as per the tax slabs for senior (60 years and above) and very senior citizens (80 years and above), depending on whether it is received as a lump sum (commuted) or in a staggered manner. Commutation means payment of a lump sum in lieu of surrender of a part of the pension.

  • Commuted pension for government employees is exempt from tax. However, for non-government employees, one-third pension is exempt if they have received gratuity and half is exempt if they have not received gratuity.
  • Non-commuted pension is taxed at the prevalent rate.

Please note Resident senior citizens who do not have any income from business or profession are exempted from payment of advance tax, irrespective of tax liability quantum

Form 15H and 15G One can submit forms 15H and 15G to avoid tax deduction at source. A person who is 60 years or more can submit Form 15H, but only if he/she has not paid tax in the previous assessment year. The form must be submitted at the start of the financial year. Form 15G is for individuals below 60 years of age and Hindu undivided families. Our article How to Fill Form 15G? How to Fill Form 15H?  discusses it in detail.

Things to keep in mind while investing Retirement money

As majority of individuals in this age bracket stop earning, it becomes a priority to ensure a source of regular income and have investments that are more liquid to meet any untoward emergency. Cash flow needs can be covered through a combination of rent, dividend, interest income and systematic withdrawal plans (SWP). Some pointers to keep in mind while investing post retirement.

  • As a senior citizen, while safety of capital is paramount, don’t forget to take into account the tax factor. Taxes can actually erode the value of your returns.
  • Also another black hole to watch out for is inflation. Many seniors opt for the security of assured returns and end up finding that the value of their investment has eroded due to inflation.
  • Investments with long lock in period should be avoided.
  • Have contingency funds for medical emergencies and health checkups

Investments should be made be across assets which enhances wealth and also makes returns more predictable. Besides having allocation towards safe debt products which caters to cash flow requirements, do not avoid equity-oriented investments.Retirees think they are taking risk by investing in equity. However, one should limit their exposure to 20-30% in equity, ideally through mutual funds to own an inflation beating portfolio. One needs to strike a balance between traditional and market-related investments.

Investment Options on Retirement

Retirement planning has become synonymous with investing in avenues with guaranteed and secure returns. However, one must realise that in the bargain most end up opting for instruments that not only generate low returns but are also least tax-efficient. What needs to be done is to strike a balance between traditional and market-related investments. Given below are the options where one can invest one’s retirement corpus.

Senior Citizens’ Savings Scheme (SCSS)

This is a savings scheme launched by the Indian government particularly for senior citizens. Our article Senior Citizen Savings Scheme, SCSS discusses it in detail.

  • All seniors above the age of 60 years can invest in this scheme. Those who are above 55 years of age are also eligible to invest in this scheme but are subject to certain conditions.
  • The scheme has a lower limit of Rs 1,000 and an upper limit of Rs 15,00,000.
  • One can invest up to Rs 15 lakh through post offices or designated public sector banks.
  • The scheme has a period of 5 years and carries an interest rate of around 9 per cent. The five-year lock-in period can be extended for another three years.
  • The interest is credited to the account on March 31, June 30, September 30 and December 31.
  • The investment in Senior Citizen Scheme (only the first investment) qualifies for deduction under Section 80C of the Income Tax Act.
  • TDS If the income earned is over Rs 10,000, tax is deducted at source.
  • A penalty of 1.5 per cent is applicable on the amount deposited in case the deposit is withdrawn before 2 years and 1 per cent if the amount is withdrawn after 2 years but before the expiry of the term.

Post Office Monthly Income Scheme (POMIS)

  •  Are you looking for a guaranteed monthly income? Then monthly income scheme (MIS) offered by various post offices in the country is best suitable for you.
  • You can invest a minimum of Rs 1,000 and a maximum Rs 4.5 lakh for a single account and Rs 9 lakh for a joint account.
  • You earn around 8 per cent interest when you are invested. The interest rate is a tad lower than the SCSS.
  • The maturity period is six years.
  • The return is credited to a designated account on a monthly basis. One can collect the payment from the post office or transfer the amount to the bank account electronically
  • If you withdraw after a year, a penalty of 5 per cent of the amount deposited is applicable. However, there is no penalty after 3 years.
  • The account can be easily transferred to another post office.
  • The returns are added to the income and taxed as per one’s income tax slab.

Post Office Time Deposit (POTD)

This is similar to the term deposit offered by banks. Since the investment is backed by the government of India, it is risk-free and offers guaranteed returns.

  • The minimum amount to be deposited in this scheme is Rs 200 and, thereafter, in multiples of Rs 200.  and there is no limit on the maximum amount than can be deposited.
  • The period for the deposit ranges from 1 year to 5 years and the interest rate ranges from 6.25 to 7 per cent, compounded quarterly.
  • .The interest payout is annual.
  • Here, too, the interest income is subject to tax, though tax is not deducted at source.T
  • he five-year deposit is eligible for tax deduction under Section 80C of the Income Tax Act.

Fixed Deposits (FD)

Offered by various banks and companies they have been the most sought after by those looking for safe returns.. Though the interest rates on the bank deposits are lower than the interest rates on company deposits, bank deposits are safer. Always choose deposits with AAA rating, as they are the safest from amongst all the deposits. Our article Senior Citizen,Fixed Deposits and Tax discusses it in detail.

  • There is no minimum investment requirement.
  • Senior citizens get 0.25-0.5 per cent over and above the regular rate.
  • The tenure can be a mere week to 10 years.
  • The applicant can opt for crediting of interest to a savings bank account on quarterly, semiannual or annual basis.
  • There is also an option for re-investment of interest.
  • Barring for tenures of five years and above, bank FDs do not enjoy any tax exemption. The long term FD (five year-plus), which is eligible for deduction under Section 80C, cannot be liquidated in the middle of the term and, hence, is illiquid.
  • Tax:The interest attracts TDS and cess if it is more than Rs 10,000 in a financial year. One must note that the risk is low only as long as the bank is in a good financial shape. In case the bank goes bust, only Rs 1,00,000 is guaranteed (by the Deposit Insurance and Credit Guarantee Corporation).

Monthly Income Plans (MIP)

Debt mutual funds, especially monthly income plans and liquid funds are ideal assets for senior citizens to invest in. They offer capital protection for moderate returns, are liquid, and also have the benefit of providing regular income streams. Since senior citizens enjoy a higher tax cover, there may not be any tax implications on these investments (depending on one’s investment levels, etc.)

Monthly Income Plans are market linked investment options offered by mutual funds. These are best for those who are conservative but still want some exposure to equity markets.

  • These are open-ended schemes that invest most of their money in debt instruments. Only a small portion is put in equities.
  • The regular income comes from dividend payouts. However, unlike post office plans, where returns are guaranteed, there is no such surety about dividends from mutual funds. These are paid either on monthly, quarterly or on annual basis. Also, the amount is not fixed. The dividend is not taxed but redemptions are taxable as per capital gains rules.
  • Redemption before three years attracts short-term capital gains tax. Profits from MIPs sold after three years are considered long-term capital gains and taxed accordingly, that is, subjected to a flat tax rate of 20 per cent with indexation.


Annuity products are mostly available through pension plans. You invest in a pension policy and on maturity you use the corpus to buy an annuity. Only few insurers offer immediate annuity products, which you buy from ready corpus.
Currently annuities offer about 5-8% depending upon the annuity option you have chosen. The rate gets fixed for the term and you can’t revisit your investments.

An individual should essentially have one pension plan in addition the other investment options to have a regular source of income after retirement. Pension plans are available for people up to the age of 80 years. Investment in a pension plan can be performed in two ways. One, by depositing a lump sum amount and later receiving the money as monthly payouts inclusive of interest earned; secondly, by depositing money quarterly that will be provided either as lump sum or monthly, depending on your choice.

Senior Citizen retirement Annuity Plan

Senior Citizen retirement Annuity Plan

Public Provident Fund

Though PPF is mainly the preferred route for building a corpus for retirement because of its tax benefits, it can also be used to park a part of the final corpus, preferably by extending the existing account in blocks of five years instead of opening a fresh account and locking the money for 15 years.

  • One can invest up to Rs 1,50,000 every year in PPF. It has a lock-in of 15 years. However, one can extend the account three times after the end of the 15th year in a lot of five years.
  • You can withdraw a part of the corpus from seventh year. This amount cannot exceed 50 per cent of the corpus at the end of the preceding year. You can also take a loan against the corpus from third-year onwards. The rate for this is two percentage points more than what is offered to investors.
  • Public Provident Fund (PPF) is among the few options exempt from tax at both investment and maturity stages under Section 80 C and Section 10 (10D) of the Income Tax Act, respectively. PPF investments also qualify for deduction under Section 80 C of the Income Tax Act. This reduces the overall tax burden.

Reverse Mortgage

Reverse mortgage provides regular income or interest in exchange of the property..  This is a product for those who have real estate but not much free cash.

  • In this, the retired person keeps a house as collateral with the bank.
  • In return, the bank makes monthly payments according to the value of the house.
  • During the receipt of regular income, the borrower can continue to live in the property.
  • The borrower can opt for monthly, quarterly, annual or lump sum payments.As reverse mortgage is a loan, the interest rate is either fixed or floating.
  • The payments are not taxable. This is because the amount received from the bank is considered a loan and not income.
  • As per the RBI guidelines, the maximum period for which the property can be mortgaged is 20 years, after which either the borrower or the heir (in case of the death of the borrower) can either repay the loan or sell the house and settle the transaction. The excess amount generated in the process is passed on to the borrower or the heir.
  • The borrower can also  claim back the property by paying higher rate of interest.

NSC (National Savings Certificates)

In NSC scheme one can invest for duration of 5 years. NSC (IX issue) with maturity period of 10 years discontinued with effect from 20th December 2015. Our article What are National Savings Certificate (NSC) discusses NSC in detail

  • Once invested into NSC, withdrawal is only possible after 3 years.
  • Amount invested is eligible for deduction under Section 80C. Interest accrued during the year except for the last year is deemed to be reinvested and shall also qualify for deduction under Section 80C.
  • No TDS is deducted on repayment.

Fixed Maturity Plans (FMP)

FMPs are close-ended debt mutual funds with tenures ranging from three months to three years.

  • These are close-ended and cannot be redeemed like other mutual funds before maturity. They are listed on exchanges where they can be bought or sold, though they are a highly illiquid investment.
  • Even though liquidity is an issue, the one factor on which FMPs triumph over FDs is returns. It has been observed that debt mutual funds give returns that are 50-100 basis points more than what is paid by FDs.
  • Also, FMPs are more tax efficient for tenures over three years as they enjoy indexation benefits with a fl at 20 per cent tax rate.
  • Given their structure, FMPs are more suitable for individuals in the 30 per cent tax bracket. If the investment is for one to three years, the investor has to add the gains to his/her income and pay tax according to her/his income tax bracket.

Equity Mutual Funds  and SWP

You need to generate inflation adjusted returns and debt assets cannot do that consistently. Long term capital gains (on redemption after a year) from stocks and equity mutual funds are not taxed. Hence, these two products are ideal for investing a part of the corpus. You need to have some equity exposure. However, experts say one must avoid over-exposure to stocks after retirement because they are risky.

  • Dividends from stocks and equity mutual funds are tax-free.
  • Short-term capital gains, that is, profits made by selling within a year of purchase, attract 15 per cent tax. To avoid this, invest in stocks for the long term.
  • Through STP, one can invest a lump sum in a particular fund (say debt) and, thereafter, transfer a fixed sum regularly to another mutual fund (say equity). This ensures that your corpus starts with the safety of a debt fund even as you slowly keep increasing exposure to equity funds.

SWP IN MIPS To tide over the uncertainty over dividend payments in MIPs, investors can opt for systematic withdrawal plans (SWPs). In SWP, you can choose the frequency and quantum of payments. If the scheme fails to generate returns that match the agreed payout, you will be paid from the principal amount. In SWP, the investor is liable to pay short- and long-term capital gains tax.

Comparison of Post Retirement Investment Options

Comparison of few retirement options are as follows:

Fixed Deposit Senior Citizen Saving Scheme Post Office Term Deposit NSC Mutual Funds Pensions Plans
Minimum Investment 7 days Rs 1,000 Rs 200 Rs 100 Rs 500 Rs 200
Maximum Investment No upper limit Rs 15 lakh No upper limit No upper limit No upper limit No upper limit
Investment tenure 7 days-10 years Up to 8 years 1-5 years 5-10 years Can be both short and long term Can be both short and long term
Lock-in period Same as tenure 5 years No lock-in Same as tenure 3 years 3 years
Rate of interest 6%-8.5% (revised every year) 9.3% 8.2%-8.5% 8.6%-8.9% Market-linked 3%-7%(depends on the issuer)
Penalty on premature withdrawal Interest rate applicable will be 1% less than the original rate. E.g:on breaking an FD of Rs 1 lakh opened @ 8.5% for 4 years will get you returns @7.5% 1%-1.5% Interest paid will be according to the postal saving scheme and not as per the plan. No premature withdrawal allowed No premature withdrawal allowed No premature withdrawal allowed

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Retired life is supposed to be the golden period of our lives, and if we manage our money with some rules, we will be able to enjoy it as well. You must evaluate your tax liabilities before selecting the investment options. Try and strike a balance between tax-saving, income generation and safety.

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LIC Bima Diamond Policy

LIC completed 60 years of its incorporation in August 2016. LIC’s celebrated this  by announcing bonus and granting a onetime special  bonus. It also launched LIC’s Bima Diamond Policy(Plan No. 841) on 1st September 2016 which is available for sale for up to 31st August 2017. This Bima Diamond Policy is the 4th policy launched by LIC in 2016 and is a non-linked traditional money back policy. This article reviews New LIC Bima Diamond Policy, its features, benefits and for whom this policy is ideal.

Highlights of LIC Bima Diamond Policy

LIC Bima Diamond Policy is  non-linked plan i.e it is NOT Unit linked Insurance Plan or ULIP which are a combination of life insurance and investment plans. In 2016 LIC lanuched 3 plans LIC Jeevan Labh Plan, LIC Jeevan Shikhar Plan and LIC Jeevan Pragati Plan.  Key features of LIC’s new money back policy, Bima Diamond Plan are

  • Money-Back: Money back at an interval of every 4th year. From the first premium paid, for every 4 years of subsistence, a percentage of the sum assured will be paid as survival benefit to the policy holder.
  • On survival, the policy holder will receive the balance sum assured + loyalty additions.
  • Extended Life Cover : Extended cover period for half of the policy term after end of the policy term.
  • Auto cover feature : On a policy of at least 5 full years on which subsequent premium is not duly paid, auto cover period of 2 years is available.
  • Premium Paying Term : Under this plan, you pay premium only for less years than the time for which policy is active. i.e The premium paying tenure is less than the life cover tenure. There are 3 fixed options.
    • Policy Term of 16 years with Premium Paying Term of 10 years. Example : If you buy LIC Bima Diamond policy with Rs 5 lakh sum assured for 16 years then you need to pay the premiums for up to 10 years. Your life cover shall be for 24 years (16 Years policy term + 8 years extended coverage). You will get money back 3 times i.e 4th, 8th, 12th during policy tenure and rest on  maturity.
    • Policy Term of 20 years with Premium Paying Term of 12 years:  If you buy LIC Bima Diamond policy with Rs 5 lakh sum assured for 20 years then you need to pay the premiums for up to 12 years. Your life cover shall be for 30 years (20 Years policy term + 10 years extended coverage). You will get money back 4 times(4th, 8th, 12th ,16th ) during policy tenure and rest on  maturity.
    • Policy Term of 24 years with Premium Paying Term of 15 years: If you buy LIC Bima Diamond policy with Rs 5 lakh sum assured for 24 years then you need to pay the premiums for up to 15 years. Your life cover shall be for 36 years (24 Years policy term + 12 years extended coverage). You will get money back 5 times(4th, 8th, 12th ,16th  , 20th) during policy tenure and rest on  maturity.

Existing LIC Money Back Plans

Money Back plans offered by LIC and overview of LIC Moneyback plans are given below.

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Cricket:BCCI , BCCI Finances and Lodha Committee

 “If the International Cricket Council (ICC) is the voice of cricket, the Board of Control for Cricket in India (BCCI) is the invoice of cricket.” said late Mansoor Ali Khan Pataudi  in 2010. A senior BCCI official unabashedly said, “It wouldn’t be wrong to call us the big brothers of international cricket. We enjoy a similar clout in the ICC as the United States of America does in the United Nations.” This article looks at What is BCCI? Finances of BCCI, how it earns and spends? Why was Lodha Committee Formed? Recommendations of Lodha Committee?

About BCCI

The Board of Control for Cricket in India (BCCI) is the national governing body for cricket in India. The board was established in December 1928 under the Tamil Nadu Societies Registration Act. It’s a consortium of state cricket associations and the state associations where they select their representatives who in turn elect the BCCI officials. Cricket in India at all levels is governed and managed by the Board of Control for Cricket in India, the wealthiest Board in the cricket world. The board backs the popular Indian Premier League (IPL), which sees various franchise teams across different Indian cities contesting every year under the Twenty20 format. Why BCCI was regsitered in Tamil Nadu and other details at What Is The Business/Organizational Structure Of BCCI And Why Is It Registered In Tamil Nadu?

Constitution of BCCI

The constitution of BCCI forms a Working Committee and various other Committees and Members. The BCCI’s constitution provides for annual elections at its Annual General Meeting (AGM) for all posts, with a bar on the re-election of an incumbent president beyond two consecutive years, “provided that the General Body may in its discretion re-elect the same person as president for the third consecutive year”. The main working of BCCI’s daily affairs is looked after by the Working Committee. The President is mainly questioned about its working, and he leads the Board officially. The Secretary helps in the operation of the bank accounts as a sole signatory and also his name is used when the Board sues or is sued by an outsider if disputes arise.

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How to do online Contribution to NPS using eNPS

One can make online contributions to NPS account using eNPS. The National Pension System (NPS) allows its subscribers to open NPS Tier I and Tier II accounts online through the eNPS. Subscribers who have also not opened accounts online can also make contributions to NPS online, using the e-NPS portal. The eNPS facility has made the NPS registration and contribution  easy .This article gives an overview of eNPS and talks about How to make do Contribution to NPS  using eNPS.

Overview of eNPS

What is eNPS?

eNPS or electronic National Pension Scheme at, is the online platform through which you can open an NPS account and make contributions to it.

  • Open Individual Pension Account under NPS (only Tier I / Tier I & Tier II).  You can open this account online by using your using PAN or Aadhaar. Our article eNPS : Open NPS account online, contribute to NPS online discusses how to open eNPS account in detail.
    • If you are using the PAN, you also need to give your bank details for completing the know-your-customer (KYC) process. And you can only do it if your bank is empanelled with PFRDA. According to the NPS Trust website, PFRDA or rather SBI ePay,payment gateway for NPS, currently has empaneled with 40 banks, you can find your bank on the PFRDA website at: .
    •  Opening the account with Aadhaar is simpler. Just give your Aadhaar details on the online platform and verify the details with a one-time password (OTP). Supreme court has allowed usage of Aadhaar for the pension scheme under the National Social Assistance Programme (Old Age Pensions, Widow Pensions, Disability Pensions), apart from MGNREGS, PMJDY and EPFO. On 17 February 2016, PFRDA decided to allow the use of Aadhaar as e-KYC, which makes opening an account online much simpler.
  • You can make initial and subsequent contribution to your Tier I as well as Tier II account. Points to note
    • There are no limits or restrictions to making contributions to your NPS using the e-NPS platform.
    • It is important to have an active Tier I or Tier II account in order to make an online contribution.
    • NPS Lite or Atal Pension Yojana subscribers cannot avail of the facility of making contributions through e-NPS.

For queries on eNPS please contact : 022 – 4090 4242 or write to: [email protected]

How to make Contribution to NPS account using eNPS

To make an online contribution, the NPS subscriber is required to go to the eNPS website and click on the Contribution button as shown in image below.

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Should you delay your Life Insurance (term) decision

Soham, a 35 year old marketing manager led a content life with his wife and two kids, till disaster struck. While driving to work last year, his car collided with a rash truck driver. Though his life was saved, the injuries he sustained meant that he would take some time to get back to normal life. His main worry (when he realised he won’t be able to work for another year) was – how will he and his family (housewife and 2 children) manage monthly expenses for the next year. And hence, at a time when he had to take care of his health completely, he was left worrying about his family. Although he had an accident cover, it only covered the hospital bills and that too partially. He had put off the decision to buy a life cover, as he had an accident cover, and now it had failed to cover his situation. With some savings and help, he barely managed to make ends meet that year.

With Indian roads accounting for the highest fatalities in the world (400 road deaths per day in India in 2015); this can be a similar fate of many in India. While we all feel we are safe now and can wait another day to get a life insurance or term cover; a better judgment would mean getting a good cover as soon as we can. In Soham’s case after a year due to high medical bills; plus taking at least 6 months more to find a good job again – not only have all of his savings been completely wiped out, he has been left with a huge amount of debt which can take him at least 3 more years to pay off. For Soham, a second was all it took to have his future planning seemed to have come apart.

Several insurers offer pure term insurance policies online; which also offer critical illness and disability cover. Online policies are offered at very reasonable rates as the agent’s commission gets cut out; yet most of us hesitate as we feel we already have an accident or medical insurance policy and can wait some more time. Very often applying for a life insurance cover like a term plan is similar to going to the dentist or filing your returns- it needs to be done but you don’t want to do it today. But in all these cases the delay can cost you your hard earned money.

Here is how the longer you delay getting life insurance the more costly it can become for you :

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