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  • Planning to Retire Early? Here’s What You Must Consider While Purchasing a Pension Plan

    Life Insurance
    • Premiums as low as Rs.17/day for sum assured of Rs.1 crore*
    • Claim up to Rs. 1,50,000 deduction under section 80C**
    • Choose between annual and monthly premium payment options

    A few decades ago, people aimed to work throughout their productive life and retire only when they could no longer take it. However, the priorities have changed over time. Millennials do not prefer to have a life where they simply work for the most part and retire only when they cannot remain active. Early retirement is planned by most of the working professionals today. By taking an early retirement, these individuals aim to explore other avenues of life. Most importantly, they wish to enjoy a quality lifestyle after their retirement without any hassles or financial constraints. This is where a pension plan comes into play.

    Retirement planning is essential for everyone irrespective of their income or lifestyle. The flexible plans available in the market allow people to choose an ideal retirement plan within their annual budget. Retirement planning is especially important if you are planning to retire young and well within your prime productive years. Your reason for early retirement could be anything, but there is no denying that you need adequate money to stay retired and enjoy what life has to offer.

    Types of annuity or pension plans

    Let’s say you are planning to retire at 45 years of age. You need to have an understanding of the different variants of pension plans available for you.

    • Immediate annuity or deferred annuity plans: Pension plans can be broadly classified into immediate annuity and deferred annuity plans. Immediate annuity plans are typically single-premium plans that pay pension immediately after the start (within a month or so) of the policy. In the case of deferred annuity plans, customers can choose the age at which the pension payment will start. The deferment period offered here will help policyholders build a corpus by investing yearly premiums. In addition, policyholders can also earn accumulated interest and profits through deferred annuity plans.
    • Endowment or unit-linked plans: Policyholders may also choose between endowment and unit-linked pension plans. Most of the retirement savings plans are endowment plans that are risk-free. However, policyholders may also choose unit-linked plans if they have an appetite for high risk. Unit-linked plans provide the flexibility of allowing policyholders to choose the type of funds in which they invest. Similar to the risk, the growth potential is also very high here.
    • Plans with/without life coverage: These two variants are available in the market based on one’s requirements. In the case of plans without life coverage, only the invested money will be returned to the surviving dependents. On the other hand, plans with life coverage pay the sum assured amount mentioned in the policy document.

    Factors you must consider

    Apart from the type of pension plan, you must also consider the following factors if you are planning to retire early:

    • Monthly expenses: Your day-to-day living expense is the main thing you must consider while planning your retirement. Once you retire, your regular source of income is cut-off. In this case, you need to think about your family’s regular monthly expenses. You need to build a corpus big enough to take care of these expenses. Apart from monthly expenses, you also need to allocate sufficient funds for your post-retirement activities. For instance, if you wish to travel every year, your annuity must cover these expenses and help you save money for travel. If the income from your pension plan is not sufficient, it could seriously affect your post-retirement plans.
    • Inflation: When you are calculating your monthly expenses, do not make the mistake of calculating it based on today’s expenses. The cost of various things could increase drastically over the years. Hence, it is important to make sure that you take inflation into consideration while calculating your monthly expenses. Even a conservative estimate of 5% to 6% inflation per year could help you arrive at the near approximate amount you need in the future.
    • Life expectancy: There is no way to predict how long a person is going to live. Hence, your retirement corpus should be large enough to support your needs during your old age. Running out of money during the ripe old age is one of the worst things that could happen to anyone. Some annuity plans pay throughout one’s life and some plans pay only for a specific period. Evaluate your requirements carefully before you decide on which type of policy to purchase.
    • Rate of interest: The returns offered by various pension plans differ significantly. If you are building a corpus from a very young age, you need to understand the rate of interest while calculating the returns offered by a policy. Most of the life insurers in the market have premium calculators that could help you determine how much you can earn from a specific pension plan.
    • Major expenses: There are certain major expenses you might have to encounter once or twice in life. For instance, you will have to pay for your children’s higher education and marriage. If you don’t have provisions for these expenses, your post-retirement plans will be drastically affected.
    • Medical expenses: When people retire young, they tend to ignore their future medical expenses. As you get old, you may have to end up spending a lot of money on medical checkups and treatments. If you have a health insurance cover, you need to consider the premium expenses. Also, it is essential to have adequate provisions for unforeseen medical expenses you may encounter in the future.
    • Assets and loans: Another major thing you have to consider is your current assets and outstanding loans. If you have outstanding loans, you should find a way to pay off these loans within you productive years. If these loans are not paid off, it could take away a chunk of your annuity income.

    Conclusion

    If you are planning to retire early, you must focus on all these factors while purchasing a pension plan. These factors will help you arrive at the exact amount you may need following your retirement. When it comes to pension plans, the best thing you can do is to start early in order to build a large corpus. If you plan your finances well, early retirement and high quality of life will be well within your reach.

    *The customer reviews/feedback/opinions expressed on this website are solely of their authors and do not reflect, in any way, the view of BankBazaar Insurance.

    Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.

    Pension Plans Reviews

    • LIC Life Insurance
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      LIFE INSURANCE CORPORATION OF INDIA is the insurance provider where i have taken the JEEVAN LAKSHYA policy before 15 years and i am using it, policy premium i ma paying on yearly basis also the policy coverage is for complete family. /it also provides the accidental benefits with this policy.
      Was this review helpful? 2
      , new delhi
      Reviewed on Jan 30, 2019
    • LIC Life Insurance
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      I have taken the JEEVAN LABH life insurance policy with the LIFE INSURANCE CORPORATION OF INDIA where the tenuity period of this policy is for twenty years also i am holding it since from last 15 years. The premium i am paying for yearly once with this policy.
      Was this review helpful? 2
      , new delhi
      Reviewed on Jan 30, 2019
    • LIC Life Insurance
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      I am holding the JEEVAN SATHI policy with the LIFE INSURANCE CORPORATION OF INDIA since from last fifteen years as the maturity period is for twenty years with this life insurance policy. It gives the life coverage after the maturity period.
      Was this review helpful? 1
      , new delhi
      Reviewed on Jan 30, 2019
    • LIC Life Insurance
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      I am using the LIFE INSURANCE CORPORATION OF INDIA since from last 15 years where i have purchased the JEEVAN SARAL policy which gives the policy coverage is for complete family where the maturity period is for twenty years also the premium i pay by yearly once.
      Was this review helpful? 2
      , new delhi
      Reviewed on Jan 30, 2019
    • LIC Life Insurance
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      The name of the policy is JEEVA ANAND policy that i have purchased it through the LIFE INSURANCE CORPORATION OF INDIA before 15 years. where the maturity period is for twenty years also the policy coverage is for complete family. The premium i pay on yearly once.
      Was this review helpful? 1
      , new delhi
      Reviewed on Jan 30, 2019
    • LIC Life Insurance
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      I have purchased the life insurance policy with the LIFE INSURANCE CORPORATION OF INDIA where the name of the policy is MONEY BACK where i am holding it since from last 15 years. It gives the life coverage after the maturity period with this insurance policy.
      Was this review helpful? 1
      , new delhi
      Reviewed on Jan 30, 2019
    • LIC Life Insurance
      "GOOD POLICY"
      0.5 5.0/5 "Blown Away!"
      I am holding the BHIMA GOLD policy with the LIFE INSURANCE CORPORATION OF INDIA LIFE INSURANCE CORPORATION OF INDIA where i have been using it from last 10 years. The premium i pay for 3 months once also the maturity period is for 15 years with this policy.
      Was this review helpful? 0
      , yamuna nagar
      Reviewed on Jan 30, 2019
    • LIC Life Insurance
      "GOOD POLICY"
      0.5 5.0/5 "Blown Away!"
      I have taken the JEEVAN SARAL policy with the LIFE INSURANCE CORPORATION OF INDIA where the maturity period is for 12 years also the premium i pay for 3 months once for this insurance policy. It gives the self coverage with this insurance policy.
      Was this review helpful? 1
      , yamuna nagar
      Reviewed on Jan 30, 2019
    • LIC Life Insurance
      "GOOD POLICY"
      0.5 4.0/5 "Great!"
      LIFE INSURANCE CORPORATION OF INDIA is the insurance provider where i have taken the life insurance policy. I am not aware of the name of the policy but it is a life insurance policy where the maturity period is 20 years along with that it gives the life and accidental coverage with this policy.
      Was this review helpful? 0
      , nagpur
      Reviewed on Jan 30, 2019
    • LIC Life Insurance
      "GOOD POLICY"
      0.5 4.0/5 "Great!"
      I have taken the life insurance policy of CHILD PLAN with the LIFE INSURANCE CORPORATION OF INDIA where i am using it since from last en years also the maturity period if this policy is for 20 years and the premium i pay yearly once. It gives the self coverage.
      Was this review helpful? 1
      , nagpur
      Reviewed on Jan 30, 2019
    • Bankbazaarinsurance.com Life Insurance
      "CONVENIENT PORTAL TO USE"
      0.5 3.0/5 "Satisfactory"
      It is the first time experience with the Bankbazarinsurance.com where i am using it through the website as the portal is user friendly also it i s convenient to access. the customer servcie is good but if they respond properly and correctly it would be better.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 30, 2019
    • ICICI Prudential Life Insurance
      "GOOD POLICY"
      0.5 3.0/5 "Satisfactory"
      The reason for taking the life insurance policy with the ICICI PRUDENTIAL is because it is good policy to use. Premium and the IDV value is satisfactory wit this insurance policy. It is the term plan, i have not received the hard copy yet with this policy.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Jan 30, 2019
    • ICICI Prudential Life Insurance
      "GOOD POLICY"
      0.5 4.0/5 "Great!"
      I have purchased the accidental policy with the ICICI PRUDENTIAL where in am using it since from last one year and it gives the coverage for self for any accidentals. Premium i am paying it on 6 months once as 6k-10k with this insurance policy.
      Was this review helpful? 0
      , nizamabad
      Reviewed on Jan 29, 2019
    • LIC Life Insurance
      "GOOD POLICY"
      0.5 5.0/5 "Blown Away!"
      I have taken the life insurance policy with the LIFE INSURANCE CORPORATION OF INDIA and the name of the policy is JEEVAN SREE plan where the maturity period is for 22 years and i got the sum assured amount added on that they are giving the coverage after the maturity.
      Was this review helpful? 0
      , nizamabad
      Reviewed on Jan 29, 2019
    • ICICI Prudential Life Insurance
      "GOOD POLICY"
      0.5 5.0/5 "Blown Away!"
      I have taken the EULIP policy with the ICICI PRUDENTIAL where it gives the self coverage also the maturity period of this policy is for 20 years. Premium i pay on monthly basis with this policy. The documentation process is simple and easy to get the policy.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 29, 2019
    • LIC Life Insurance
      "GOOD POLICY"
      0.5 4.0/5 "Great!"
      LIFE INSURANCE CORPORATION OF INDIA is life insurance provider where i have taken the MONEY BACK policy with this and i am using from last few years and the policy has got matured. The maturity period is for 15 years where the premium i pay yearly once.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 29, 2019
    • Bharti Axa Life Life Insurance
      "BETTER"
      0.5 3.5/5 "Pretty good"
      I am holding the life insurance policy with the BHARATI AXXAwhere i have been using it since from last two years and the name of the policy is CHILD PLAN where the maturity period is for 10 years. I am paying premium for 6 months once with this policy.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Jan 29, 2019
    • Bankbazaarinsurance.com Life Insurance
      "USER FRIENDLY PORTAL TO USE"
      0.5 5.0/5 "Blown Away!"
      The customer service is very good and i am very much satisfied because they have supported by getting the life insurance policy also they are responsive. It is the first time experience and i am using it through the mobile application as the portal is user friendly to access.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 29, 2019
    • Aegon Life Life Insurance
      "GOOD POLICY"
      0.5 5.0/5 "Blown Away!"
      The reason for taking the life insurance policy with the AEGON LIFE is because when compared to the other insurance polices it is best. It is the term insurance policy where i pay the premium on monthly basis. The policy coverage is for self and spouse.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 29, 2019
    • LIC Life Insurance
      "GOOD POLICY"
      0.5 4.0/5 "Great!"
      I have been using the life insurance policy with the LIFE INSURANCE CORPORATION OF INDIA since from last 10-15 years where the maturity period of this policy is for long term added on that the policy coverage is for complete family. Premium i pay on yearly once for this insurance.
      Was this review helpful? 0
      , noida
      Reviewed on Jan 29, 2019
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