Retirement planning refers to a multi-step process of defining retirement income goals and the strategy required to achieve the said goals. In general terms, retirement planning involves making financial strategies to save, invest and distribute money for your sustenance and survival during retirement.
Why Do You Need a Good Retirement Plan?
Retirement planning is not limited to assets and income. It includes a holistic evaluation of these, along with future costs, liabilities and overall life expectancy. Ideally, it is a life-long process, which can be started at any time. However, it is always best to plan your retirement years well and much in advance.
- Tackle impending medical emergencies: As you age, health problems only increase. This means you would be required to shell out more money towards medical expenses later in life. The inflation rate is predicted to rise by nearly 14-15% each year in this space. So, your savings should also grow at the same rate to match the inflation.
- Effectively combat inflation in the future: Inflation is a sad reality, and in a country like India, inflation is expected to cross the standard 5% estimate. This would imply that by the time you retire, your savings would be worth much less in comparison to the present times. A robust retirement plan will ensure that you do not outlive your reserves and have strong purchasing power even in retirement.
- Substitute the lack of state sponsorships: Unlike the UK and the U.S., there are no specific pension or other retirement plans that Indian government offers to retirees of the private sector. Hence, after retirement, you have to take charge of your livelihood.
What are the Benefits of Retirement Planning?
Retirement planning is a crucial process to ensure you enjoy the non-working years of your life. For this, you need to invest in a reliable retirement plan so that you are secure for life.
- Peace of mind and well-preparedness: A well-planned retirement reduces your stress and also makes you more prepared for uncertainties and emergencies, including medical crises. It provides you with a sense of self-reliance and makes your golden years more relaxed.
- Assurance of savings and steady retirement income: Planning adequately for retirement ensures you have substantial savings to support your standard of living during a time when you do not have a steady source of income.
- Secure property and assets: Without a strong retirement plan, you would more be inclined towards selling off assets and properties to manage your expenses later. However, building a retirement fund will safeguard your assets and property, and allow you to pass it on as a legacy to your children.
- Effective transition from working to non-working mode: An in-depth retirement plan helps you transition smoothly from a working force to a non-working force. You would be in a more secure place and can move on in life easily.
- Reduction in taxes in later years of life: Retirement planning helps you reduce taxes that you would otherwise be liable to pay during retirement. A good retirement plan can also help you to minimise liabilities and taxes for the beneficiaries.
- Minimise costs with lower premiums at a young age: A retirement plan made in the younger years helps you plan and save better. You would be likely to pay lower premiums, and thus, have better chances to save and grow funds.
- Provides guaranteed^ monthly income: Pension plans offer a fixed income in retirement in exchange for investments made today. This allows you to not only make the most of your hard-earned income but also gives you enough flexibility.
- Facilitate encashing on the long-term investment benefits: Retirement plans are long-term plans, and depending on the annuity option you choose, your annuity rates will be decided It allows you a steady income in retirement, helping you live a stress-free life.
- Offer flexibility in payment of premiums: Retirement plans in India allow you to either invest a lump sum and get immediate annuity receipts or select a deferred plan that allows you to pay the premium and decide when you want to start receiving the regular income from.
- Provide death benefits and riders like a life insurance cover: Some pension plans offer a death benefit, where a lump sum is paid to the family or the nominee can opt to buy an annuity. You can also buy additional cover through riders for selective plans and strengthen your protection. So, at a minimal cost, you can increase your coverage and avail yourself of numerous additional benefits.
- Offer tax benefits allowing more savings: Retirement plans are eligible for tax benefits under Section 80CCC as per the Income Tax Act, 1961.
What are Retirement Plans?
Retirement plans are reliable financial security solutions, that help you secure your future financially. The purpose of a pension plan is to safeguard the future years of life and secure a regular income after retirement. A good retirement plan can help maintain your living standard, as well as combat the rising inflation and the overall high cost of living.
What are the Features of a Retirement Plan?
A pension plan is a very popular retirement tool. Some of its most significant features and benefits include:
- Tax Efficiency: One of the most talked-about features of a retirement plan is the tax deduction that it offers. Policyholders can avail themselves of tax exemptions under different sections of the Income Tax Act, of 1961.
- Accumulation Duration: When policyholders invest in a pension plan, they accrue wealth over time to create a sizeable corpus that includes investment in addition to the gains.
- Vesting Age: Pension plans allow policyholders to have a wide range of vesting ages. The minimum age is generally 45-50 years, while the maximum can extend to 70 years. This large vesting age bracket allows policyholders to determine when they wish to receive their regular pension as per their requirements.
What are the Documents Necessary to Buy a Retirement Pension Plan?
Below are the documents necessary to buy the best retirement plan:
|Age Proof||Birth Certificate|
High School Certificates
|Identity Proof||Aadhar Card|
|Address Proof(any one)||Passport|
Telephone Bill-latest within 6 months
Electricity Bill-latest within 6 months
|Income Proof(any one)||Latest Salary Slip-3 month Bank Account Statements of latest 6 months– only if salary credit is reflected with employer name Income Tax Return (ITR) documents of last 3 years|
|Medical Condition Proof||In some cases, insurers demand recent medical reports before purchasing the retirement plan.|
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