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Retirement plans are life insurance products designed to act as investment plans to allocate a part of your savings to accumulate over a period and provide financial security after retirement.
Retirement pension plans help you invest your earnings over the years and create a fund which you can withdraw as a whole or in parts during your retirement years. Further, with dual benefits of protection with investment, these plans are ideal for covering your financial needs in the golden years of your life. Given the high cost of living and rising inflation, retirement planning has become more necessary.
We tend to invest our hard-earned money in meeting our day-to-day needs so much so we pay little attention on securing a comfortable and prosperous life for ourselves in our later years.
Most of us have demanding jobs and even demanding lifestyles. In the daily hustle bustle of out stressful lives, do we even give a thought to life after retirement? But we owe it to ourselves to take a deep breath and think about the future too. What would be the point of working so hard if we are not able to enjoy the fruits of labour in our retired life? Apart from lifestyle, we have responsibilities towards our families that may not go away with retirement.
To ensure that your post-retirement life is smooth and peaceful, and your family is still well looked-after, planning for retirement now is very important. Basis your current age, income, lifestyle and life goals, you can choose an investment amount and plan for your retirement.
Retirement from professional life should not mean that you stop getting a regular income. Retirement plans allow you to allocate a part of your savings and let them grow over a period of time. You can then opt to get regular pay-outs after you retire.
When you’re young, the idea of retirement hardly comes to your mind. The most prevalent thought is that ‘Retirement is so far away!’ ‘Why would I need to save for it right now?’
Even though your income may not be a lot when you’re younger, you also have fewer responsibilities such as house loan, child’s education etc. and these responsibilities just keep on growing with age. Hence, saving for retirement becomes easier, early in your professional life.
The biggest advantage of kick-starting your retirement planning is the power of compounding which provides the foundation for time value for money. Even if you invest a small amount for several years consistently, it will grow into a large corpus for your retirement.
Between saving small amounts early in life or saving big chunks of your income close to your retirement age; which one would you prefer? Saving little early does seem like the easier and more sensible option, doesn’t it? With big expenses and a lifestyle to maintain, it would be harder to save large amounts of money when you’re middle-aged or close to retirement.
Most retirement plans give you tax benefit on both the investment amount and the maturity amount. You may invest in pension plans, guaranteed returns plans or market-linked plans, all of these have different provisions for tax benefits.
On an average, a working Indian professional would retire around 60 years of age. Given that you lead a healthy life and considering the increased life expectancy, your retired life could span up to 40 years! How do you possibly imagine of saving for a long tenure of 40 years in just a couple of years before your retirement? Starting in your twenties is the only practical solution to save for a long retired life.
A deferred annuity is a long-term investment in which you invest a sum of money, then receive payments several years down the line after the initial sum has accrued interest. In a deferred annuity plan, there are two phases: accumulation phase and income phase. At the end of accumulation phase, you can withdraw 1/3rd of the corpus and buy an annuity plan with the remaining 2/3rd of the corpus. You can claim tax benefits under Section 80CCC for an investment in annuity. However, the pensions are taxed.
The premiums paid towards these plans are mostly invested in debt instruments like government securities. These are best suited for individuals who are low risk-takers.
A ULIP is a life insurance plan with an additional feature of investing your money in the market for future financial goals such a retirement. This means that you get the dual benefit of protecting your family as well as retirement planning.
A ULIP also provides tax benefits as the premium or amount invested into the ULIP is exempted from tax under Section 80C. The amount received on maturity of this investment plan, is also tax exempted under Section 10(10D) of the Income Tax Act, 1961
EPF is available to all salaried employees subject to the rules laid down by EPFO. In this case, the employer and employee contribute a percentage of employee’s salary to the employee’s
PPF is a popular long-term investment option which offers capital preservation and attractive interest rates. A minimum of Rs 500 to a maximum of Rs 1,50,000 can be invested each financial year.
Contributions to NPS can be made from a young age of 18. NPS offers investors: the active choice and auto choice. In active choice, 50% of the contribution is invested in equity, while the rest is in government and corporate bonds. In auto choice, investments are made in a mix of equity, corporate and government bonds, depending on your age.