Do you know what pension
plans are designed for? Yes, they are solely designed for your retirement
planning. Pension plans provide you with a promise of income inflows for your
entire life. This way, when you retire, you do not have to worry about your income
coming to a standstill. Pension plans are, therefore, a good tool for
retirement planning, aren’t they?
Yes, they are and that’s why
you should have a pension plan in your financial portfolio if you want to plan
for your retirement. But, do you know when you should buy a pension plan? Since
retirement is perceived to be a long period away, we delay in investing in a
pension plan. But, is the delay good?
What if I tell you that
though your retirement is far away, you should start planning for it right now?
Yes, you heard me right. Retirement planning is an essential financial goal,
one which you should start at the earliest. Want to know why? It is because of
the following two reasons:
·
The
miracle of compound interest – if you remember your math lessons correctly,
you would know what I am talking about. Compound interest lets you earn
interest on any interest you have already earned. Confused? Don’t be. Through
the process of compounding, any interests you earned on your savings get added
to your invested amount which is again eligible to earn future interests. Due
to this compounding feature, if you make investments over a longer period, you
can accumulate a good corpus. For this to happen, you need to start saving
early.
·
Affordable
savings – when you start investing in pension plans from an early age, you
can make small affordable investments to accumulate a substantial corpus. Since
compounding works on your investments, such small investments made over a long
tenure can yield very good returns and give you a huge corpus.
Let us understand these points with a simple example:
Suppose you are 30 years of age and want to invest in a
pension plan which you would require on your retirement at age 65 years. If you
make monthly contributions of Rs.2000 for 35 years, you get a corpus of
Rs.28.49 lakhs (approximately) or Rs.29 lakhs at an interest rate of 6% per
annum. Now, if you were to start investing in a pension plan sometime in your
40s, let’s say at 45 years, and want the same corpus, do you know how much you
would have to save every month? Rs.6300 (approximately), almost three times the
original savings. Imagine!
This is what saving early implies. Investing in a pension
plan at younger ages is, thus, advised so that you can accumulate a good corpus
and that too by making small and affordable savings.
So, one thing is certain. You should start buying pension
plans when you are young. But when we talk about the best age, what should it
be? Let’s find out:
In your 20s
20s is the period of fun, frolic and merriment. Graduating
from college and getting that new job brings in financial independence and you
are too busy fulfilling your various dreams. At this age, pension plans take a
backseat. Even then, after fulfilling other priorities, you must endeavor to invest
in pension plans even when you are in your 20s so that you can get a good
corpus on retirement.
In your 30s
This phase is a serious retirement planning phase. Despite
planning for children’s future and creating assets, you should start saving
small amounts for your retirement planning. For your affordability, you can
start saving small amounts monthly towards a pension plan and later supplement
your savings through another plan.
In your 40s
Investments in pension plans should be aggressive at this stage.
If you had already started saving in your 30s, you can make small contributions
but if you still haven’t bought a pension plan it is time you wake up. Buy a
pension plan today and start your investments.
In your 50s
A phase where retirement planning takes the center stage,
isn’t it? In this stage you should supplement your retirement investments by
buying other pension plans. If you have already invested in a plan, stay
invested.
In your 60s
With retirement round the corner, you should simply sit back
and watch your investments yield returns. You can invest in immediate annuity
plans whereupon you would get annuity payouts instantly. Find the best pensionplans in India with single premiums for this purpose.
Retirement is a golden phase which can be enjoyed if you
have made financial provisions for it. Pension plans should be bought at the
earliest for the maximum possible benefit. If you are dilly-dallying your
retirement planning, take heed of this advice and start planning
your retirement today.
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