Keep these 4 factors in mind while planning for retirement

• 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

All working professionals must plan for their retirement and start investing from a young age when they are active. Retirement is the time when you are typically done with all the responsibilities and start enjoying a quiet, stress-free life. If you don’t have enough money to take care of yourself during retirement, you may end up sacrificing your lifestyle and compromise on fulfilling your remaining dreams. This is the reason why you must investment in retirement/pension plans and build a corpus sufficient to take care of your future needs.

There are different forms of endowment policies available with life insurers. Most insurers offer pension plans designed specifically to take care of one’s retirement needs. These retirement and pension plans come with customised benefits to provide both lump sum benefit as well as periodic fixed income following your retirement. One of the added advantages of these covers is the insurance aspect. If a policyholder dies during the policy term, his/her dependents will get the accrued sum assured amount along with the additional bonuses. Considering the benefits available with these policies, it is worth investing in these covers to take care of your future requirements.

Things to consider before buying a Retirement/ Pension Plans

When you decide to buy a retirement or pension plan, you need to consider the following factors and protect your post-retirement needs:

• Start early: When you decide to invest in a retirement plan, the best thing you can do is to start early and invest as much as you can. If you start early, you can build a large corpus with a small monthly/yearly investment amount. Moreover, the lengthy maturity period will help build a large corpus through different types of accrued bonuses and yearly profits.
• Think about your future requirements: Sometimes, people underestimate their post-retirement needs and often end up building an insufficient corpus. Pension plans provide one-third of the invested money as lump sum payment upon maturity. The remaining amount is provided at periodic intervals as pension. You must make sure that your expenses are taken care of with this pension amount. Factor in all your requirements ranging from day-to-day living expenses to unexpected medical expenses while you calculate the corpus.
• Take inflation into consideration: Another thing that people often miss out is the inflation. The monetary value of a particular product will not remain the same over the course of 20 or 30 years. Consumer price index inflation rises at the rate of 4% to 5% (approximately) in India every year. If this is not taken into consideration, your corpus might be insufficient to manage all your future requirements. This is the main reason why it is really important to invest in plans that provide sufficient returns adjusted for inflation.
• Consider the low-risk options: It is necessary to maintain a diversified portfolio in order to reduce the risk. Also, endowment plans are savings plans that do not invest in the market. These are much safer compared to ULIPs. If you are building a corpus for retirement, make sure that the investment is risk-free. By investing in risk-free retirement plans, you can take advantage of the insurance protection in addition to the savings aspect.
• Think about your spouse’s insurance needs: Before you focus on investing in retirement plans, you must also think about the requirements of your spouse. Your requirements will double if you also consider the needs of your spouse. In addition to regular living expenses, you must also allocate additional provisions for medical expenses, travel expenses, insurance premiums, etc. for your spouse. Make sure that you consider these additional expenses when you sign up for a retirement policy.
• Focus on taxation: Tax relief is provided for all premiums paid to insurance schemes. This is applicable for retirement plans as well. Even the insurance proceeds obtained from life insurance policies are tax-free in most cases. However, this is not the case with pension plans. Here, the one-third of the sum assured amount provided on maturity is tax-free. However, the period pension amount added to the income of the policyholders is taxable. Moreover, the annuity received by the spouse following the death of the primary policyholder is also taxable. When you plan your retirement corpus, make sure that you also account for taxation on the pension income.
• Take advantage of the flexibility: Retirement plans come with a lot of flexible options based on the specific requirements of policyholders. The income level of an individual does not remain the same throughout the career. As you start earning more, you may like to invest more in your retirement plan. Most retirement plans allow users the flexibility of investing more through top-ups. Through this way, investors can increase their fund value even midway through the policy.

Conclusion

A retirement plan is something that everyone must have. Even if you already have a term insurance cover, you must consider getting a retirement plan just to take care of your post-retirement needs. There are multiple options available when it comes to building a corpus for your retirement. You may also consider other options like PPF, mutual funds, etc. However, the benefits offered by pension plans make it a worthwhile investment. When you decide to opt for a pension plan, make sure that you consider all the above-mentioned factors and decide on your coverage accordingly.