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Why You Should Not Procrastinate on Your Retirement Planning?

Imagine this scenario: You are 67 years old, healthy and hearty, sitting on the porch of your two-storeyed home listening to the sounds of your grandchildren playing. In the evening, you have a dinner at your favourite restaurant planned with your close friends. And in the next two days, you are going to be boarding a flight to Paris, for a Europe trip planned to last for a month. And what’s the important thing about all these scenarios? You’re funding all of it yourself, independently.

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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Such scenarios can be achieved, with beginning your retirement planning, may be, in your twenties itself. However, people may usually postpone their retirement planning to the later stages of their life. As per India Retirement Index Study’ (IRIS), 2022, a shocking 86% of people over the age of 50 had regrets about not planning their retirement earlier1.

 

Why should you not procrastinate planning for your retirement?

 

As with other decisions related to money and financial independence, it is preferred if retirement planning is approached as soon as possible, too.

Otherwise, you may experience the following disadvantages:

 

• Plans could become expensive to maintain

 

Age is one of the factors that influences premium for your life cover part of the life insurance plan, hence your premium for your life cover part of the life insurance plan may typically be lower when you are 30 years as compared to when you are 45 years old. Furthermore, buying a life insurance plan at a young age allows you and your loved ones to enjoy financial security for a longer period.

 

• Returns may be diminished due to a smaller timeframe

 

Along with higher maintenance costs, another monetary drawback of late retirement planning might be the relatively diminished returns. These kinds of investments perform optimally if they are held for the long term, since this allows compound interest to do its work effectively.

Let’s consider two investors, Anuj and Rashmikant, as an example.

Anuj understood the importance of retirement planning and started investing in a ULIP when he was 30 years old with the intention of wealth generation for retirement.

Using the help of a retirement plan calculator to better understand his goals, he decided to invest Rs 60,000 every year until he was 60 years old.

On the other hand, Rashmikant awakened to the benefits of retirement planning very late. He began his retirement plan at the age of 45 years by investing Rs 1,80,000 every year for the next 15 years.

By the time both were 60 years old, assuming a steady return of 8% for both, Anuj has accumulated approximately Rs 55 lakhs while Rashmikant has been able to accumulate approximately Rs 45 lakhs only.

*Note: The above figures are for illustration purposes only and not indicative of actual returns. Please refer to the online calculator and policy brochure for more details on ULIP product and fund performance.

 

• Chances of investing in an aggressive portfolio may reduce

 

Another way your returns may reduce due to a late start in retirement planning is because, at a later stage in life, you may not want to invest aggressively, if you have a lower risk appetite. You may want to stick to a more conservative portfolio, which includes fixed-income securities, low-risk instruments, etc.

The benefit of investing in a ULIP with a conservative approach is that you bear lesser risks, which is suitable when you are nearing the end of your work life. However, the market linked returns may be lesser with such an approach, as compared to investments in high-risk equity instruments.

 

• You may lose out on related tax benefits

 

Every year you pay the premium for your ULIP or retirement-oriented life insurance policy, you have the opportunity to save up tax on Rs 1.5 lakhs of premium paid by claiming deduction under Section 80C or Section 80CCC of the Income Tax Act, 1961. Premiums paid towards a specific retirement plan, such as a pension plan or an annuity policy, are also eligible for deductions under Section 80CCC. Note that this deduction is clubbed with the rest of the Section 80C deductions and the maximum limit for the total claimable deduction under Section 80C is Rs 1.5 lakhs.

Further on maturity of annuity policy, any commuted value of pension is tax free in the hands of policyholder under Section 10(10A) of Income Tax Act,1961.

Also, note that some deductions may not be applicable if you are opting for the new tax regime. Only those who are paying tax via the old tax regime may be able to enjoy the deductions, as long as the terms and conditions prescribed in Income Tax Act,1961 are met.

Before proceeding with any plan, ensure to consult a financial advisor and/or a tax expert. Using tools such as the retirement plan calculator and the ULIP calculator can also help you in the process of starting your retirement planning early.

References:

1https://www.outlookindia.com/business/59-indians-worried-they-would-run-out-of-funds-before-their-retirement-reveals-study-news-226780#:~:text=A%20huge%2086%20per%20cent%20of%20people%20over%20the%20age%20of%2050%20years%2C%20in%20fact%2C%20regretted%20that%20they%20hadn%E2%80%99t%20yet%20started%20investing%20for%20their%20retirement%20sooner.

BJAZ-WEB-EC-02570/23

Retirement Planning Guide

Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

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Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

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Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

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Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

**Past performance is not indicative of future performance.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.

The views stated in this article are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read the sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

In this policy, the investment risk in investment portfolio is borne by the policyholder. Investment in ULIPs is subject to risks associated with the capital markets. The policy holder is solely responsible for his/her decisions while investing in ULIPs.

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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.

~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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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, SMS or WhatsApp sent 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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%%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%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*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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^Subject to Section 10 (10D) conditions i.e. aggregate annual premium for ULIP policies issued on or after 1st February 2021 does not exceed Rs. 2.5 Lakhs.

1Minimum premium mentioned is applicable for Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01) and is subject to policy terms and conditions.

#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.

*Benchmark: Nifty 500 Multicap Momentum Quality 50 Index past 5 CAGR Returns, as on 31st December 2024. Past returns of a fund are not necessarily indicative of the future performance of the fund. | Please consult the financial advisor before investing.

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

ULIPs are different from the traditional insurance products and are subject to the risk factors. The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Bajaj Allianz Life Insurance Company Limited is only the name of the Life Insurance Company and 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) are only the name of the unit linked insurance contracts and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. 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.

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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