Retirement Investment Plans In India
Irrespective of the age at which you choose to retire, it’s essential to save up for retirement, so you can enjoy your golden years without worrying about your finances. When you’re younger, a significant portion of your time is spent working. It’s only later in life, when you’ve retired, that you may find the time to catch up on your life goals like traveling the world, learning new skills, or cultivating various hobbies. To fulfil your post-retirement dreams, it’s crucial that you plan for the future as early in life as possible.
If you’re keen on getting started with the practice of saving up for your golden years, a retirement investment plan can be extremely helpful. When done right, retirement planning can ensure that you have a corpus of funds that’s sufficient to secure your future as well as the future of your spouse. To help you save up for your retired life in an informed manner, here’s everything you need to know about such investment plans.
What is a retirement investment plan?
An ideal retirement investment plan could be a life insurance-investment plan that is specifically focused on ensuring financial security for retired individuals after they’ve stopped receiving their working income. Typically, to invest in such retirement investment plan, you need to begin as early in life as possible. This way, your capital grows significantly and leaves you with a retirement corpus that’s substantial enough to support you after you’ve attained your retirement age.
Over your working years, you will be required to pay regular premiums towards your retirement investment plan. A portion of this premium shall be directed towards providing you a life cover, while the rest of the premium is invested in market-linked or non-linked instruments. If you survive the tenure of the retirement investment plan, you will receive your retirement benefits at the end of the term as a lump sum payment or in the form of periodic payouts.
Why should you invest in a retirement investment plan?
In current scenario, a retirement plan has become an essential part of your investment portfolio. Younger people who have 20 years or more to attain their retirement age can benefit greatly from investing in a retirement plan early in life. Here’s why you should include a pension plan in your portfolio.
• It helps you cultivate the habit of saving
While it’s common knowledge that a portion of the income earned must go towards saving for the future, this feat is easier said than done. The primary reason behind why so many people fail to save for the future in a disciplined manner is that more often than not, the money earned is spent on immediate needs or luxuries. A retirement investment plan helps you circumvent the temptation to spend your money hastily and helps you save in a disciplined manner.
• You gain from the power of compounding
Having your funds saved up in a bank account only earns you a simple interest. On the other hand, when you invest in such retirement plans, you get to enjoy the power of compounding benefit, where your money grows over a period of time if planned well in advance. Remaining invested for the long term ensures that you experience the benefits of compound interest to the fullest, so your investment grows significantly over the course of 20 to 30 years, just in time to enter your retirement age with sufficient financial security.
• It offers you the dual benefit of investment and insurance
Retirement plans do not act as mere investment vehicles. They also offer the advantage of a protective insurance cover, which can prove to be extremely useful after you’ve retired. The investment portion of a retirement plan can be customized according to your risk appetite. So, you can choose to invest in market-linked instruments or in more secured instruments Either way, your initial investment grows by a sizable amount over the course of the plan. The life cover also ensures that your dependents are financially secure in case of your demise.
• You get to remain financially independent
Another compelling reason to invest in a retirement plan is that it grants you financial independence in your golden years. After you stop receiving your working income, the payouts from an annuity plan can help you take care of your own needs without relying on financial assistance from your children. It also allows you to pursue your post-retirement goals without worrying about burdening your family financially. There’s no replacement for the opportunities that come with the financial independence offered by these investment plans.
Types of retirement plans available in India
If you’re keen on getting started with your retirement planning, there are several types of plans available in India. Before you choose the right plan for your future, ensure that you make use of a retirement calculator to understand exactly how much you’ll need to save. This helps you chart out an investment budget that is in line with your post-retirement goals and needs. Once you have a clear idea of how much you’ll need to save for the future, you can consider investing in any of these retirement investment plans.
1. UNIT LINKED INSURANCE PLANS (ULIPS)
ULIPs are life insurance-investment products that offer you market-linked returns. Depending on your risk profile, you can choose to invest your premium in equity, debt instruments, or a mix of both. At the end of the policy term, you receive maturity benefits... Together, these funds can help you live independently well past your retirement age.
Benefits of investing in ULIPs
• They offer flexible investment options with varying levels of market risk.
• They help you save up in a disciplined manner.
• ULIPs come with tax benefits on the premium paid and the benefits received.
• They allow for partial withdrawals in case of emergencies, after the lock-in period
• ULIPs help spread your investment risk across various instruments.
2. ANNUITY PLANS
Annuity plans are structured in a manner that’s specifically beneficial to retired individuals who no longer receive a steady paycheck from their jobs. You, too, can plan for your post-retirement life by investing in an annuity plan. Throughout the term of the plan, you pay premiums that are invested by the insurance company. Once the plan has matured, the insurer pays you periodic annuity payments from your corpus fund, so you receive a steady income even without a job.
Benefits of investing in annuity plans
• Annuity plans allow you to enjoy a steady stream of income.
• There are several types of annuity plans, so you can always find the perfect one for your specific needs.
• Annuity plans allow you to remain financially independent.
3. HEALTH INSURANCE
Health Insurance must form an essential part of your retirement plan. With medical costs rising each year, and with inflation factored in, you may have to shell out a huge portion of your retirement savings if you’re diagnosed with any critical illness later in life. A health insurance plan can help you during such medical emergencies.
A health insurance plan works in the same way a life cover does. You’re required to pay premiums to the health insurance provider over the course of the policy’s term. The premium can be paid as a lump sum amount or as periodic payments. In case you’re diagnosed with any of the conditions covered under the health insurance plan purchased by you, your insurer either bears or reimburses the medical costs associated with your treatment in accordance with the health insurance coverage opted by you. To that extent, your savings remain unaffected.
How to find the right retirement investment plan for your needs?
To find the right retirement plan for your requirements, you need to consider the following factors.
• Your retirement requirements: You first need to identify the amount of money you need to save up for retirement. A retirement calculator can help you figure this out. Remember to account for inflation as well, so you can obtain a more realistic estimate.
• Vesting age: Vesting age is the age at which you start to receive your retirement benefits. The right plan will come with a vesting age that aligns with your retirement age, so you can start to reap the benefits of your investment as soon as your regular income stops.
• Payout options: Some retirement plans payout a lump sum amount, while others make periodic annuity payments. You need to identify which kind of payout best suits your post-retirement goals and pick a plan that fits in with those requirements.
• Premium schedules: Depending on your financial situation, you need to choose from among plans that allow for limited premium payments and the ones that require you to pay premium throughout the term of the plan.
Conclusion
This information on retirement plans can help you get started with saving for your golden years. Remember to pick a plan that suits your post-retirement goals, and ensure that you invest regularly, so your capital can appreciate enough to help you live comfortably after you’ve retired.
