Retirement plans are actually a category of life or annuity plans that are thoughtfully designed to help those nearing their retirement or those planning to safeguard their retired future to plan the process. Typically, individuals opt for early retirement planning to build a safety net against unwarranted medical emergencies, rising costs of living, and upcoming obligations so that they can enjoy their retired life and maintain their living standards.
Ideally, by planning a retirement in advance individuals can plan their finances better and safeguard their future. However, the success of the planning would depend entirely on the plans they choose. Individuals should carefully select their pension plan and evaluate the scope of the best retirement plan in India to make an informed decision and ease their financial burden for the future.
Why do you need to plan for your retirement in advance?
Planning retirement while one still has a job is a smart move as it helps individuals mobilize a part of their income to build a retirement corpus. Typically, the early in career one starts their planning the easier it is to build a robust corpus with limited savings. Besides this, individuals should plan their retirement in advance owing to the following things -
Increasing retirement period
The average life expectancy is increasing, making it vital for individuals to plan for a longer and more extended retirement. For instance, in our country, the average life expectancy of individuals aged 60 is around 18.02 years. It means that the average individual tends to live up to 78 years. This makes it important to start planning retirement from an early age to comfortably build a retirement corpus even with limited savings. It further allows them to meet their expenses and maintain their lifestyle independently in their retired life.
Rising medical expenses
Older adults are more susceptible to develop Illnesses and age-induced health complications, which tend to increase with an increase in age. This makes it vital to have a retirement plan to rely on so that they can avail of medical attention without the fear of draining their finances in the future. Also, the fact that the cost of medical treatment is soaring at a rapid speed further adds to one's worry, especially for the retired who have limited savings to manage the high cost. In this regard, putting money into the best retirement plan in India is a viable approach to secure retirement.
The desire independent retired life
Every individual aims to lead a financially independent and comfortable retired life. Investing in a comprehensive retirement plan can help them achieve financial independence and make them self-sufficient to lead a comfortable life and meet their daily expenses with ease. Since a majority of retired individuals depend on their savings to tide over expenses post-retirement they should plan their retirement with the help of the best retirement plan in India.
Top Features of comprehensive pension plans
The features and their accompanying benefits of pension plans make them a must for retirement plans. Some of the key features of such plans include -
Annuity
This is essentially a fixed sum that individuals receive annually throughout the tenure of their retirement plan. However, it should be noted that annuity plans can either be immediate or extend deferred payouts based on their nature and scope. Individuals must pick the annuity type and payout option based on their financial standing and flow of expenses.
Sum Assured
This is a definite amount that the plan provider offers to the retirement plan's nominee at the end of its tenure. Notably, often the sum assured of significantly higher than the annual premium or the overall value of the policy plan. Opting for plans with high sum assured is an effective way to safeguard the future of dependents.
Vestige age
It is essentially the age at which the account holder begins to receive the promised pension amount monthly or as per the chosen payout schedule.
Payment period
This is when individuals start to receive the plan payout after their retirement.
Accumulation period
It is essentially the period during which the investor pays the predefined premium towards their pension plan.
Types of pension plans
Deferred Annuity
This pension plan helps build a corpus over time through regular premiums or a single payment, making it suitable for individuals comfortable with regular or lumpsum payments. In this plan, the pension is paid after the policy tenure. Deferred pension plans also offer tax benefits where a third of the saved corpus is deemed tax-free while the remainder is taxed as per the individual's tax slab. Notably, the plan doesn't allow withdrawal, making them rigid.
Immediate Annuity
This plan extends a range of annuity options to choose from and it extends immediate pension when a lump sum amount is paid. Notably, the premium paid in this retirement plan is exempted from taxation. It also allows the nominee to receive the payout in the event of the sudden death of the insured during the active policy tenure.
Guaranteed period annuity
This pension plan extends payouts to the account holder for a prefixed period ranging from 5 years, 10 years, 15 years, to 20 years. The payment tenure may outlive the pension account holder.
Life Annuity
This plan is designed to pay a pension to the annuitant until their death. The plan also offers a ‘with the spouse’ option which allows the pension amount to be transferred to the pension holder's spouse in the unfortunate event of their untimely death.
National Pension Scheme
This government-backed pension plan is designed to help secure the financial future of retirees. NPS allows individuals to park money into equity and debt funds based on their goals and risk-taking capacity to help generate substantial returns on investment. In this pension plan, individuals can withdraw 60% of the corpus and use the 40% to purchase an annuity. However, the maturity proceeds are not exempted from tax. Non-residents can also park money in NPS, using it as one of the NRI investment plans to build their retirement corpus.
Whole life ULIPs
In this pension plan, the sum invested remains parked for the entire life span of the account holder. In addition, the plan allows partial withdrawals after retirement and as needed.
Individuals must carefully analyze the scope of the plan and their requirements to pick a suitable plan. Typically, they should begin by identifying their retirement needs. Then they must factor in their financial goals and upcoming obligations to understand the pension amount they would need. Subsequently, they should research plans and compare their features to understand their scope and limitations. This approach will help them pick a suitable plan, enabling them to safeguard the financial future of their loved ones.
