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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.

 

 

Why Do You Need A Retirement Plan?

 

 

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.

 

 

Do you believe in Income after 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.

 

 

I’m Too Young to Plan My Retirement! Why Now?

 

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?’

Fewer Responsibilities
Fewer Responsibilities
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.
Power of Compounding
Power of Compounding
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.
Saving Little Early Than Saving a Lot Later
Saving Little Early Than Saving a Lot Later
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.
Tax Benefits
Tax Benefits³
Most retirement plans give you tax benefit³ 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 benefits³.
Long Retired Life
Long Retired Life
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.
Fewer Responsibilities
Fewer Responsibilities
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.
Power of Compounding
Power of Compounding
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.
Saving Little Early Than Saving a Lot Later
Saving Little Early Than Saving a Lot Later
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.
Tax Benefits
Tax Benefits³
Most retirement plans give you tax benefit³ 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 benefits³.
Long Retired Life
Long Retired Life
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.
 

Types of Retirement Plans

 

Deferred Pension Plans

 

A deferred pension plan 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. 

 

 Employee’s Provident Fund (EPF)

 

 

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.

 

 Public Provident Fund (PPF)

 

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.

 

 National Pension Scheme (NPS)

 

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.

 

 

 

More Products You’d Love to Explore

Why ULIPs Make Good Retirement Plans?

Flexibility

ULIPs let you choose the premium amount, as per your requirements. They also give you the option of selecting funds as per your choice. Many ULIPs also offer the possibility of increasing your premiums during your premium paying term.

Liquidity

No matter what your premium paying term or policy term is, after the lock-in period of 5 years, you can fully or partially withdraw funds from your account when you are in need of urgent funds.

Tax Benefit³ u/s 80c

Premiums paid are deductible from taxable income under Section 80C. The interest earned and maturity amount received is also exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961.

Tax Benefit³ u/s 80c

Premiums paid are deductible from taxable income under Section 80C. The interest earned and maturity amount received is also exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961.

Systematic Savings

ULIPs give you the benefit of putting aside a chunk of your income and save it for future use in a systematic way.

Wealth Accumulation

ULIPs not only let you save your earnings, but also help in growing wealth for retirement by allocating it to market-linked funds.

 

How to Save Tax³ with Retirement Plans?

 

Apart from securing your family’s financial future and your own future income, a Retirement Plan also offers tax benefits³ under section 80CCC.

 

Let us look at the tax benefits³ offered by different types of retirement plans:

 

  Immediate Annuity

 

While the interest you get is taxed as ordinary income, the principal amount is exempt³ from taxes. However, once you receive the principal amount in full, the payments will be fully taxable. The good thing about this is that the income tax rate will be based on the income earned at the time. Assuming that you withdraw the money after retirement, the rate will be relatively low.

 

  Deferred Annuity

 

There are two phases in a deferred annuity plan: Accumulation Phase and Income Phase. In case of the deferred annuity plan, your income grows tax-free³ during the Accumulation Phase which means that you won’t have to pay any taxes on the money that accumulates during the time of premium payment.

 

  ULIP

 

The premium or amount invested into the ULIP is eligible for tax benefit³ under Section 80C. The amount received on maturity of this investment plan, is also tax exempted³ under Section 10(10D) of the Income Tax Act, 1961, subject to fulfilment of criteria specified therein.

5 Tips to Buy the Right Retirement Plan

Start Early

Retirement planning is most effective when you start it as early as getting your first salary. It is fine if you start saving with small amounts. You can grow your contribution towards your retirement corpus as you progress professionally and financially.

Don’t Put All Your Eggs in One Basket

It is always advisable to diversify your portfolio by investing in different types of market instruments when it comes to your retirement planning. Equity fund, debt funds, fixed deposits etc. are some of the instruments you can invest in to fulfil your post-retirement goals.

Keep Vesting Age in Mind

Vesting age is the age by which you start receiving your pension from a retirement plan. It is not necessary that each one of us will retire at the age of 60 years. Some of us may have plans to retire at 45 years and some of us may want to continue working till 70 years. It’s important to choose a plan options that suits your requirements and aspirations.

Compare Plans and Expenses before Buying

Don’t just compare plans in terms of returns, also factor in the expenses and charges that come with retirement plans. Pick a plan that is economical and viable on all fronts.

Don’t Just Rely on Traditional Schemes

Traditional Retirement Schemes like PPF or EPF may be reliable and time-tested, but they will hardly suffice as a steady income post retirement. Hence, always thing of other retirement plans such as ULIPs.

We are always there for you!

0 - Provided the premium paying term is more than or equal to 10 years.

1 - This is applicable only if all due premiums are paid and the policy is inforce.

3 - As per provisions of Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.

The Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender/withdraw the monies invested in Linked Insurance Products completely or partially till the end of the fifth year.

 

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