Retirement planning does not always mean focusing on your finances. It is a fine mix of personal and financial planning. While financial planning helps you budget your finances and expenses, your personal plan will determine the lifestyle you would like to follow once you finally retire. It is the combination of these two that will help you choose the best pension plan for your investment portfolio.
Take a look at some of the reasons why you need to do retirement planning:
- You need to stop working at some point
- You may face medical complications with age
- Your working years are the best time to fulfill your future aspirations
- Start planning early and diversify your investment portfolio
- No need to depend on your children for your sustenance
Needless to say, if you want to live a peaceful and contented life in your retirement, then you need to plan ahead and invest in the best pension plan.
Features & Benefits of Pension Plans
Gone are the days when planning for pensions in India was limited to investing in long-term instruments only, such as fixed deposits or PPF. However, with the advent of new investment products, that approach has changed significantly as more and more people are curious to learn about what is life insurance and how does a pension plan helps them secure their future.
Today, investors want to build a robust financial portfolio that protects them at every stage of their lives. So, if you are considering a pension plan in your portfolio, here are some benefits that will help you make the right decision.
1. You Get Guaranteed Income
Your pension plan will give you a fixed and steady income after you retire if you choose a deferred plan. You can also get instant benefits if you invest in an immediate plan. This will help you stay financially independent even after retiring. You can also explore online tools like a retirement calculator to estimate how much you would need after retiring.
2. Tax Saving
A pension plan may also provide tax exemption under section 80C of the Income Tax Act. Be sure to read the policy document to educate yourself about the tax deductions and how you can leverage this benefit to save money.
3. Withdrawal Option
Even though retirement plans are considered to be low-liquidity instruments, there are certain plans that allow you to make withdrawals after a certain period of time. These funds will help you during financial emergencies, without you having to rely on bank loans.
4. Choose The Vesting Age As Per Your Preference
Vesting age, in pension plan parlance, is considered to be the age when you start receiving your monthly pension. For instance, the minimum vesting age for most pension plans start at the age of 45-50 years. However, in some cases, it may be flexible up to the age of 70 years.
5. Wealth Accumulation Tenure
You can choose to either opt for paying the premium in one lump sum amount or in regular intervals. Regardless of the method you choose, the wealth will accumulate over a period of time to build you a corpus of funds. Your pension for the duration of the plan will come from this corpus.
6. Pension Payment Period
Often confused with the accumulation period, the pension payment period is the duration for which you will receive a pension after your retirement. While most pension plan providers like to keep the accumulation and payment period separate, some may allow you to make partial withdrawals during the accumulation period.
7. Overcome Inflation Costs
The biggest advantage of investing in a pension plan, especially if you start early, is that it helps you overcome the cost of inflation. When you are evaluating pension plans, make sure you choose the one that offers returns that are inflation-adjusted. It will help you keep up with the rising cost of living and maintain your lifestyle, even on a pension!
8. There Are Plans For Every Need
Every investor has different expectations for their future. However, luckily there are plenty of pension schemes available these days that are suitable for all kinds of investors. You can choose the one that is in alignment with your retirement goals.
If you have surplus funds, consider investing them in annuity plans and start receiving annuity payments immediately. People who cannot pay in lumpsum can make monthly payments and choose a deferred plan.
9. Protect Your Loved Ones
It is one of the most critical aspects of one’s life to secure your loved ones and their financial stability. You want to make sure that they are financially independent, even if you are no longer around. This is why you must invest in a pension plan. A pension plan does not only give you monthly income after retirement but also invests a portion of your premium towards life insurance.
When looking to invest in a pension plan, experts like Max Life Insurance, recommend that you should first take your financial goals into account. Don’t forget to consider your existing income and fix an amount that you can comfortably invest in a plan. You must also research all the available plans, read up their benefits, and make a choice accordingly.
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