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Compared to other investment options which can be withdrawn as per requirement, pension plans provide annuity payouts only.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?