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What is a Retirement Plan?
Retirement plans, also known as pension plans, are life insurance plans that provide you financial security once your active income stops. These pension schemes are insurance-led investment plans that help build a large retirement corpus over a period for a comfortable and stress-free retirement.
You invest your earnings over the years in them, which is invested on your behalf by the insurer to generate income during your post-retirement years. You can withdraw the corpus as a lump sum or fixed monthly income as desired.
Why do You Need a Pension Plan?
With the high cost of living & rising inflation, retirement planning has become a must. Pension plans help you cover all the expenses arising in your post-retirement years, including going on a vacation and pursuing a hobby, among others. It gives you financial independence in your golden years as you receive a monthly income.
Regular Income
Financial security for your family
Maintain your lifestyle
An affordable way of Retirement Planning
Things to Keep in Mind While Choosing Pension Plans
Buy early
Don't you start early when you want to reach an important destination? Retirement planning is no different. When you buy a pension plan early, you have more time to save and invest to build a substantial corpus.
Know the corpus you want to build
Knowing the approximate corpus you want to build helps you save and invest accordingly. Factor in your post-retirement needs, number of dependents, inflation, and liabilities while figuring out the final corpus amount.
Type of plan
Do you need a pension immediately or after some time? If you need it immediately, you can buy an immediate retirement annuity plan. On the other hand, if you need it after a certain number of years, go for a deferred annuity.
Pension amount needed
Amount of savings required for a pension amount of Rs. 10,000, and Rs. 30,000 differs. Knowing the pension amount needed will help you save and invest accordingly. While figuring out this amount, take into account inflation, which brings down the value of money with time.
Premium payment period
Being aware of the premium payment period, i.e., the time for which you need to pay premiums, helps you to be better prepared with money so that you can pay premiums on time, and enjoy policy benefits.
Don't look at only tax-savings
Note that investing in pension schemes only to save tax is not the right approach. The best pension plan not only helps you lower your tax outgo but also helps you meet all your financial needs in your retirement years and help you lead a stress-free retired life.