How to Handle Retirement Investment Smartly?

What is retirement? Is it simply taking a permanent break from work or does it also mean absence of income?

Retirement is a phase when, after working for most of our adult lives, we bid adieu to work. It is the phase when we are free to indulge in our dreams and wishes. It is a phase which is rightly called the golden period because we are free from most of our life’s responsibilities. But, can retirement be our golden period if we have not planned for it?

Planning for retirement basically means building a sound financial corpus which would take care of our expenses post retirement when our income stops. Therefore, we invest in various financial instruments to build a retirement corpus. But do we handle our retirement investments smartly?

Most of us don’t. Handling your retirement investments smartly requires following some basic principles. Do you know what these principles are? No?

Read on:

Ø  Ascertain your retirement requirement

Before you plunge into the investment pool to invest for your retirement, stop and take stock of your requirements. Find out the expected expenses and income after you retire. Your expected expenses should be determined based on the current inflationary trends. After you estimate your expenses, estimate the required investment which would be sufficient to fund your retirement.

Ø  Research

There are many investment instruments available in the market and you should research the various instruments to find the best one for yourself. Do not blindly copy the investment practice of your peers or relatives. Do a detailed research yourself weighing the pros and cons of all available investment instruments.

Ø  Invest in a pension plan

Pension plans offered by life insurance companies offer the perfect solution retirement planning. These plans provide annuity payouts throughout your lifetime. These annuity payouts can help you in meeting your expenses post retirement easily.

The last point must have caught your attention. You must be wondering how, from a varied pool of investment instruments, pension plans would help in handling your retirement investments smartly. Well, wonder not. Here are the ways in which pension plans are synonymous with smart retirement investments:

Ø  Pension plans earmark an investment for retirement

Compared to other investment options which can be withdrawn as per requirement, pension plans provide annuity payouts only. Though 1/3^rd of the accumulated investment can be withdrawn, the remaining 2/3^rd is compulsorily paid as annuity instalments. Thus, investment in pension plans ensures a regular stream of income which can be availed as per your requirements.

Ø  Pension plans pay annuity throughout your lifetime

The best part of these plans is that the annuity payouts continue till your entire life. You can choose the Vesting Date (the date from which you start receiving annuity payouts) and the payouts continue till you die. What’s more, there are joint annuities too which pay annuities even after your death if your spouse is alive. Which other investment has this feature?

Ø  Pension plans also come as Unit Linked Plans

Your investment should grow in tandem with economic inflation. Unit Linked Pension Plans invest your premiums in the capital market promising returns in tune with economic growth and inflation. Thus, these plans ensure annuities which are sufficient to take care of your post-retirement expenses.

Ø  You can choose a plan of your liking

Pension plans are of two types. There are deferred annuity plans wherein, first, you accumulate the corpus by paying premiums. Later, when the plan vests the annuity payouts start and continue lifelong. Then there are immediate annuity plans wherein you pay a lump sum money and start receiving annuities immediately from the following month, quarter, half-year or year. So, these plans are flexible. You can chose to invest in them over a specified period to build a retirement corpus or avail a lifelong annuity by investing in the best pension plans in India with single premium option.

Retirement puts a stop to your income but not your expenses. Handling your retirement investments smartly is essential if you want to have a comfortable retired life. Pension plans form an important aspect of this smart planning and should be included in your financial portfolio. 

source: How to Handle Retirement Investment Smartly?

Best Pension Plans in India 2017

Retirement is an inescapable period of life. Would you want to be dependent on others for your living at the old age? If not, then you should plan for your retirement today itself. Pension Plans essentially help you invest your savings so that it can be used after your retirement. Every individual wants to have a tension free and peaceful retired life after years of hard work. However with the rising inflation and people preferring to live in nuclear families one cannot expect to have a tension free life unless one has accumulated great wealth, inherited a huge sum of money or at least have a retirement plan/pension plan.

Pension plan is nothing but: 

Investment + Death Benefit + Survival Benefit + Regular Income + Tax Benefits

Types of Pension Plans

1. Deferred annuity plans:You pay a fixed amount as premium and get your money back in regular installments every month. If you have taxable income, it is given to you after tax deductions.

2. Immediate annuity plans:Here you can invest a lump sum amount of money and get a fixed amount of money for a fixed amount of time as long as you live. There are different types of plans that insurance companies offer:

• a. Guaranteed period annuity: fixed amount + fixed durationHere time is fixed irrespective of the fact that the person survives or not. For example, if someone decides to buy this plan for 20 years, s/he will get a certain amount of money for next 20 years. However, if the policy holder expires after 10 years, the money will be given to the nominee for the next 10 years.
• b. Annuity certain: fixed amount + survival benefitsPolicy holder will get a fixed amount of money for a fixed duration – here if s/he expires, nominee will get the pension for the remaining years. However, if the policy holder survives, s/he will get the pension as long as s/he lives.
• c. Life Annuity: fixed amount + Extra benefitsPension as long as policy holder lives. If the person dies, then the nominee will get the purchase price of the annuity. Purchase price = assured amount to be received on maturity + bonus

• How to plan for retirement?

• 1. How much is required? 
   While using the Pension plan calculator, remember to include increased medical cost, vacations and gifts for family. However, reduce the costs like children’s education and rent, if you own your home.

  2. Know what suits you.

  • Right Plan: choose a plan that can effectively deal with inflation and yield returns that would be sufficient to meet your needs after retirement. Also, the plan you buy should complement your existing retirement savings.
  • Pension guarantee: The perfect retirement plan is the one that also takes care ofyour dependents’ needs in your absence.
  • Flexibility of Premium payment: The ability to pay higher premium will also increase, as you will advance in your career.
  • Additional Benefits: Bonus and benefits. Benefits, such as completion of payment premiums, help in maintaining your future goals even in your absence by self-funding of premiums in case of an untimely death of the policyholder; while the additional benefits, such as loyalty bonus, fetch you a larger amount on your retirement.

  3. Know how much you need to save regularly. 
  How much you can save, depends on how much you are earning today and how much your family expenses are. Reduction in extra expenses, even the smaller once, can provide you and your loved ones, a comfortable life tomorrow.

  4. Select the right retirement plan. 
  Remember, extra benefits come with extra premium. While deciding, do consider these points: Child age (will s/he be mature enough by the time policy expirs), nuclear or joint family, rented or own house, number of dependents, dreams to be fulfilled after retirement (hobbies etc), nature of business or expected increase in future salary etc.

  5. Start saving now.
  Longer the duration, smaller will be the installments. Enjoy the power of compounding.
• Source:  Best Pension Plans in India