How To Choose A Retirement Plan: Tips And Tricks

The mechanics for saving for your retired life have undergone tremendous change. There are multiple products in the market to invest for your retirement, but the challenges are also plenty. Life expectancy has increased¹, and retirees would require their money to last through their retirement. The cost of healthcare and living, in general, has increased tremendously over the past few years. In such a scenario, prepping for your tomorrow becomes imperative today.

Choosing the right retirement plan is thus crucial. So, if you are hoping to pursue your hobbies, travel around or just sit back and relax during your second innings, you may follow these tips when thinking about how to choose a retirement plan:

Tips for choosing a retirement plan

Purchasing the suitable pension plan may seem a daunting task. For your ease, here are a few tips that you may take into account while selecting your suitable retirement plan-

1. Understand your post-retirement expenses:

Before you opt for any retirement plan, it is essential to calculate your post-retirement expenses so that you can choose a plan in order to meet the same. So, depending on your age and when you plan to retire along with your current monthly expenses, you can estimate your post-retirement expenses.

Pro tip: Keep a buffer in hand for an increase in lifestyle over the years!

2. Make sure to diversify:

Having a diversified investment portfolio is preferred. This is because putting all your eggs in one basket may seem quite risky, especially when investing in pension plans. Consider investing in a range of investment products in order to cut down the risk and enlarge the possibility of returns.

3. Choose a suitable sum assured:

Among the various investment options available, you may consider bringing life insurance into your investment portfolio as well. In case of any unfortunate event, your family must not suffer financial loss amidst the irreparable emotional loss. So, when planning for your retirement, try to include life coverage and ensure you are getting adequate sum assured so that your family is covered till they are financially dependent on your income.

4. Relying only on one plan may not be sufficient:

While the benefits of having a pension plan are many, if you think investing in one plan alone is sufficient for your retirement, you might need to think again. Hence, depending on your increasing needs you would have to ensure that you have sufficient income post-retirement.

Pro tip: You can always opt for more than one plan and secure your golden years financially.

5. Take professional help to manage your financial portfolio:

Planning your retirement income is not only an essential part of your finances but is also a task of responsibility. An insufficient investment can yield undesirable results post-retirement. To avoid any mistakes and make the suitable retirement plans for yourself and your family, you may seek the help of a financial portfolio manager. The professional can guide and suggest to you better about what can be your suitable pension plans.

6. Consider a suitable deferred annuity plan:

A deferred annuity plan offers you with annuity options that you can select at the time of vesting, i.e. when you choose to avail pension. This would ensure a steady income flow to meet your post-retirement expenses.

Pro tip: You can get an income tax benefit for the premium paid towards a pension plan upto Rs. 1.5 lakhs a year under section 80CCC, subject to the provisions of Income Tax Act, 1961.

7. Don’t go overboard. Keep premiums affordable:

Looking for a retirement plan with an appropriate returns is essential. However, it is also crucial that you do not go beyond your premium paying capacity. You may have several financial commitments in life, so it is vital that you stay balanced and do not cross your budget.

Benefits of Retirement Plans

Check out some of the striking benefits that you get to enjoy by investing in retirement plans-

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1. Tax Benefits

Under Section 80CCC of the Income Tax Act 1961², the premium you pay towards your pension plan helps you enjoy tax benefits. You can claim up to INR 1.5 lakhs for financial year.

2. Mental Peace

Having peace of mind after retirement, is what generally everyone looks for when it comes to managing finances. Retirement plans helps in assuring you of financial well-being even when you are done with your work life.

3. Regular income

One of the important benefits of retirement plans is you can get a regular flow of income to give you a sense of security and also help you with your post-retirement expenses!

Conclusion

Plan a financially strong future today. Surf through all the various options available and start investing in suitable pension plans. You can also take the help of the retirement calculator to analyse your returns on the plan you choose to make. A financially sound future begins early and with the suitable investment plans.

References:

¹ https://www.macrotrends.net/countries/IND/india/life-expectancy#:~:text=The%20current%20life%20expectancy%20for,a%200.33%25%20increase%20from%202021

² https://cleartax.in/s/section-80ccc#:~:text=Section%2080CCC%20of%20the%20Income,the%20limit%20of%20section%2080C

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