Many people consider retirement to be a distant dream. The concept of retirement planning is relatively foreign, particularly in India. Few people make particular plans for their retirement or save for it. However, if you want to live a dignified and comfortable life in your later years, you must arrange for a corpus for retirement with the assistance of a strong financial plan.
However, because India lacks a retirement pension structure, the onus is on individual investors. Employee provident funds, for example, can assist salaried persons meet retirement expenses to some extent, but business owners and independent professionals must explore for other options.
Why should you consider taking retirement plan
Because you won’t have a steady source of income after you retire, you may outlive your savings and be unable to maintain your chosen standard of living. By planning for retirement, you can significantly increase your savings without having to worry about bills in your later years.
Understanding Retirement plans
- Employment based Pension Plans
When you work, a portion of your pay is withheld and paid into the government’s EPS (Employees Pension Scheme) every month. According to government regulations, the employer also contributes to the employee’s EPS account. The corpus has grown to be quite enormous throughout the years. Following retirement, you will receive the pension amount monthly through your EPS account.
- National Pension Scheme
PFRDA (Pension Fund Regulatory and Development Authority) is a special entity established by the national government to manage the NPS, a national pension programme (National Pension Scheme).
Tier-I: When you make an investment in the NPS, you must create a Tier-I retirement account. Only once you have become 60 years old are withdrawals permitted from this account. Partial withdrawals are nevertheless allowed in certain circumstances.
Tier II: This functions like a savings account. No limitations on withdrawals are placed by this.
Auto: In this category, your age is used to determine how your assets are distributed. There are three possibilities within this: aggressive, moderate, and conservative.
- Annuity Retirement Plan
These are specially created retirement plans that can give you a guaranteed income either for the rest of your life or for a certain amount of time when you are retired. You can utilize an annuity plan to build a retirement fund from which, after reaching a set age, a regular income, known as a pension or annuity, can be received.
Annuity plans are classified into two types:
Immediate annuity: If you choose an immediate annuity, you will begin collecting your pension within one year after paying the payment. As a result, you may begin receiving annuity payments as soon as you make the initial commitment. If you are nearing retirement, this plan is ideal for you.
Deferred annuity: If you pick a deferred annuity, you can specify the timeframe or duration during which you want to receive the payout from the insurance provider. This sort of plan is best if you are still working and have a few years until retirement.
- Pension with and without insurance cover
Pension with insurance coverage
These plans are a mix of a regular monthly pension and life insurance. If the policyholder dies, the nominee receives death benefits from the insurance company. The subscriber receives pension payments for the rest of his or her life.
Pension without insurance coverage
These are simple pension plans that provide you with money for the rest of your life. These plans, however, do not provide any death benefits. The primary advantage is that these plans are significantly less expensive than combo plans. If you already have other insurance coverage, such as term insurance with a sufficient sum covered, you can choose this plan to assure a monthly income once you retire.
Never too early to begin thinking about retirement. In fact, if you begin planning for your retirement early on, you will put yourself in a fantastically advantageous position.Once you’ve begun, keep investing for retirement in a disciplined manner. This is where retirement plans may help, since they not only help you build the needed corpus but also instill investment discipline. To manage your investment plans it’s better to hire a financial advisor for your retirement plan
VBS investments is a SEBI certified financial advisory company, serving our clients with quality and transparency. We can help you with all Financial Planning, Investment Planning, Insurance Planning, Tax Planning advice, get in touch with us over here – www.vbsinvestments.com/contact/