Retirement marks the beginning of your life's second inning. The point when you no longer need to work and may devote your full attention to your hobbies. So, how can you effectively prepare for a loss of income when you still have bills to pay? This is where investing in a retirement policy comes into play.
Why Plan For Retirement?
Retirement is the time to unwind and enjoy the fruits of one's labour. However, this is only achievable if you have made solid financial plans for your golden years. Retirement preparation can help you live a more relaxed and stress-free lifestyle. You can live a comfortable and dignified life in retirement if you have investments that generate consistent income.
Investing in a pension plan allows you to park a portion of your salary in a financial asset that accumulates and grows over time, thanks to the power of compounding. The final result is a steady source of income post-retirement. Thus, retirement plans are necessary and are a simple approach to build a corpus to secure your financial future.
What Are the Different Types of Retirement Plans?
One important reason for choosing a pension policy is to prepare for income loss due to retirement. Fortunately, there are multiple plans available in the market today. However, selecting the correct strategy might significantly alleviate your concerns. The following are some of India's most common types of pension schemes.
- Annuity Plans
- a) Deferred annuity
Policyholders with deferred annuities have the option of investing in the plan in regular instalments or single lump-sum premium payments. This is known as the accumulation phase. The policyholder begins receiving the pension after the corpus is generated at the end of the policy term. The money is locked up in the scheme and cannot be withdrawn in a financial emergency. Moreover, the policy also provides the insured with tax benefits.
- b) Immediate annuity
In this plan, the pension is provided instantly. The policyholder has to make a single lump-sum premium payment here, and the pension starts soon after. In case of death of the insured, the beneficiary is entitled to the benefits during the policy tenure.
- c) Annuity certain/ Guaranteed plan
In this scheme, the policyholder receives the annuity for a fixed period. They can select the payment period that is most convenient for them. In the event of the insured's death, the nominee is entitled to the benefits under this policy.
- NPS
It is a Central Government pension plan where individuals from the public, private, and even unorganized sectors can invest. A policyholder may withdraw a portion of the fund after retirement while the remainder is paid as a monthly pension.
- ULIPs
The money invested in this scheme remains in the policyholder's account for the rest of his life, and during retirement, he can take partial withdrawals and get tax-free income. Then, when necessary, more withdrawals are permitted.
How To Choose The Right Plans?
According to research, approximately 80% of urban Indians are not prepared for retirement. One key reason to obtain a retirement plan is the rising cost of living. As there are different plans available, it is critical to consider the following elements to select the best retirement plan for yourself.
- Monthly Expenses
It is essential to build a large corpus to cover your monthly expenses. You can use a retirement planning calculator to assess the amount needed for your corpus.
- Inflation
It is critical to account for inflation when determining your corpus for a financially stable post-retirement.
- Life Expectancy
You must have a fund that can last for the longest possible time.
- Assess Your Financial Situation
It is essential to evaluate your financial condition by examining your debts and assets. Determine whether your financial situation will remain the same after retirement and make a strategy appropriately.
- Compare Policies
The best way to find the right plan is to compare various policies available and choose the one that best meets your needs.
It is essential to plan for retirement during your working years. Prudent planning and comprehensive research are required to obtain the best pension plan in India that can financially secure you in your post-retirement period.
