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Discover How To Save More For Retirement With The 30-30-30-10 Rule

Most people may have funds to use during retirement, but don’t know how to allocate them properly. On the other hand, some do not plan for retirement at all, avoiding sufficient investments while they are young. Whatever situation you view, retirement planning must be done while you are young and earning a regular source of income. In every stage of life, there are some financial obligations to fulfil for which you may save your hard-earned money. For instance, you may save for your child’s further education, or for some medical contingency. However, with some people, retirement saving is far from the mind.

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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What you tend to see, even if individuals save their wealth, is an entitlement to spend whatever is saved, not on a solid retirement plan of investment. You may suddenly, at retirement, feel a sense of entitlement that arises out of fulfilling your obligations while you were working. Nonetheless, whatever the case may be, a strict retirement plan needs to be in place.

 

What is the 30:30:30:10 rule of saving for one's retirement?

 

Most financial advisors suggest a rule that states that 30% of funds can be used for inheritance (provided you have children), 30% must be invested to grow wealth (in any hybrid instrument like debt and equity), and 30% used for living retired life. The 10% that is left over should be kept aside as an emergency fund, invested in assets that offer liquidity quickly. In case you have a pension plan fund, along with your savings, you can use this to make your 30:30:30:10 saving rule materialise.

This rule can be best illustrated with a case study in which, at first, a retired person doesn’t realise the need for any kind of saving, but to be self-indulgent with funds during retirement. However, upon closer scrutiny and sensible fund allocation, the 30:30:30:10 rule can be a good way to allocate savings for retirement.

The Case Study - Assuming an individual saves a healthy corpus for retirement, allocating it in the right way can help the individual sail through the life in a comfortable way. Individuals have a bucket list of things they wish to do during their retirement, and some of these include costs to be borne for aspects, like buying a new car, funding foreign trips, etc. The important aspects in retirement planning, like bearing costs of emergencies and the like, are rarely considered.

In the case study, a single parent was on the verge of retirement, having accumulated a significant sum of money for her retirement. With a daughter earning her own money, the lady had no dependents and wanted to give her extremely spacious flat and a few investments to her daughter as an inheritance. After retiring, the lady decided to be thrifty in nature and spend the rest of her considerable funds on herself, with vacations planned as well as some unneeded but lavish home renovations. Fund depletion is almost always a certainty with such a retirement plan.

The argument for spending freely was that this lady had performed all of her responsibilities as a single parent her entire life, worked tirelessly to fund her daughter's education and put her on a decent professional path. Now was her time to shine, she felt, to enjoy the money she had saved for deferring all the expenses she had sacrificed while working hard. Fortunately, the lady had a wise friend who put her on the correct track with the 30:30:30:10 guideline for retirement planning.

Since the lady’s daughter was well on her way to a good career and earning enough to support herself, with decades in hand to make fruitful and riskier long-term investments of her own, the lady would not have to leave her a large inheritance. Hence, the lady could afford to sell her large flat, and instead go and live in an equally high-standard retirement facility, buying a one-bedroom unit there. The rest of the funds from the sale could be allocated to more funding for retirement, and any emergencies. With more wealth in hand, the lady in question could apply the 30:30:30:10 rule, with enough room for emergencies and indulgences, inheritance, and investment, in place. Inflation would be part of the computation, and requirements of this could be met too.

 

Conclusion

 

Pension plans are solely not enough to meet retirement expenses. You may want to consider all your mandatory expenses and add inflation to the ultimate retirement plan picture. If you know the 30:30:30:10 plan, you are able to allocate funds accordingly, while you plan when you are young and earning a salary. One of the ways to allocate your funds sensibly, and plan for your retirement needs would be to look at life insurance.

Source:

1https://economictimes.indiatimes.com/wealth/plan/the-30303010-rule-of-saving-for-ones-retirement/articleshow/85709986.cms

BJAZ-WEB-EC-01152/22

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~Individual Death Claim Settlement Ratio for FY 2023-2024

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

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*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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#Source: https://economictimes.indiatimes.com/investments-marts/eight-crucial-numbers-to-ensure-financial-success/10-times-the-annual-income-is-your-life-insurance/slideshow/16699748.cms . Subject to availability in Bajaj Allianz Life ULIP Plans. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com ) carefully before concluding a sale.

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Nifty 500 Multicap Momentum Quality 50 Index Fund is available Bajaj Allianz Life Future Wealth Gain IV - A Unit- linked Non- Participating Individual Life Savings Insurance Plan (UIN:116L202V01), Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01), Bajaj Allianz Life LongLife Goal III is A Unit-linked Non-Participating Whole Life Insurance Plan (UIN:116L203V01), Bajaj Allianz Life Invest Protect Goal III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L205V01), Bajaj Allianz Life Magnum Fortune Plus III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L207V01), Bajaj Allianz Life Goal Based Saving III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN:116L206V01) and Bajaj Allianz Life Smart Wealth Goal V - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L201V01)

In addition to the already existing funds, Nifty 500 Multicap Momentum Quality 50 Index Fund is now available with the above mentioned products. Customer has an option to choose from other available funds apart from Nifty 500 Multicap Momentum Quality 50 Index Fund.

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any Call made, including via Voice over Internet Protocol & WhatsApp, SMS or WhatsApp messages, in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

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