Life is uncertain. We live in an unpredictable world where we are not sure about what's going to happen in the future. With improving life expectancy, it has become more important to secure your future by planning your retirement today!
Retirement planning or Pension plan is a kind of investment plan that enables you to collect a certain section of your savings so that you can build a secured financial future. Retirement Planning allows you to handle uncertainties post-retirement. It facilitates a steady flow of revenue after retirement.
Is retirement planning required for even a person who has a good amount of savings? Absolutely yes! Even if you have saved a lot for your future, opting for the best retirement pension plan is important.
A retirement plan builds a long-term financial cushion. It ensures that you are financially stable even after your retirement. In any retirement plan, the person is required to provide a certain percentage of money according to the terms and conditions. This continues till retirement. The amount that has been accumulated over time is given back to the insured. This is either in the form of a pension or annuity at regular time intervals. The retirement plan not only protects the financial future but also supports a person in handling the eventualities after retirement.
We need money to meet our daily needs after retirement. Savings are not long-lasting. They either get exhausted quickly or are used in emergencies. Therefore, it is crucial to opt for the best pension plan to secure your cash flow. This will enable you to live a contented life post-retirement.
A retirement plan starts providing benefits as soon as you start investing in it. When you invest in a retirement plan early, the money keeps multiplying. This happens due to compounding. The final savings corpus depends a lot on the tenure of investment. You can also opt for a retirement plan in a phased manner.
If you are not investing early, you are missing out on benefits! For example, the return that a person who is 25 years of age will receive compared to 35 or 45 will be much larger. This return will show a substantial difference in the gain.
To fulfill the requirements of the people, the market has a wide range of retirement plans. These plans have several classifications, depending on the benefits and plan structure.
An investor should not just focus on the return percentage while buying a plan. Instead, he/she should always focus on inflation-adjusted returns. This means if consumer inflation is 7% he/ she needs to choose that plan which offers more CAGR than the inflation. This way an individual can truly beat inflation in the longer term. This will give you a correct idea of what amount of corpus is adequate to retain a financially stable lifestyle post-retirement. Investing in a pension plan is a great way to combat inflation.
Sticking to a retirement plan just because someone advised you is not a good step. One plan that suits a person might not suit another. A guaranteed pension is what will secure a stable life post-retirement. Therefore, you are required to do thorough research on the provided funds offered by the asset management company and by insurance companies. Only then you will understand what exactly you need.
The contributions of up to Rs 1.5 lakh for a pension plan provide tax deduction under Section 80CCC. This comprises the percentage spent on renewing an old plan or purchasing a new pension plan. Residents and non-residents can claim tax deductions under this section. Nevertheless, HUFs (Hindu Undivided Families) are not qualified to bring these claims. The withdrawals have taxes on them.
So, what is tax-free? one-third of the corpus obtained by the retiree through the pension plan, after he reaches the age is tax-free. The rest is paid as an annuity. It is taxable. It relies on the income tax slab rate of the retiree.
No one can predict how long an individual's life will be. Therefore, while buying a certain pension plan make sure that the retirement fund is adequate to back your financial requirements during your old age.
Are you looking for a pension plan that would take care of all your needs after your retirement? Here are India's seven best retirement pension plans to help you make informed decisions.
LIC Jeevan Akshay is one of the promising pension plans available in India. This is an immediate retirement plan that enables you to purchase it by paying just one premium lump sum amount. This pension plan is the best for anyone who wants an immediate annuity. You will start getting the benefits as soon as you purchase the plan.
The Public Provident Fund (PPF) is offered by the Indian Government. It is not restricted to a certain bank. Every bank gives the same benefit while opening a Public Provident Fund account. The rate of interest is also decided by the Indian government.
It is a retirement savings scheme that is initiated to provide a secure life to everyone regarding post-retirement. The least amount of deposit a financial year can be as low as Rs. 500. It can be up to Rs. 1.5 lakh. The benefits of PPF are:
The National Pension System is a voluntary retirement saving scheme to allows subscribers to make decisions regarding their retirement and future. It is aimed at inculcating the method of saving for post-retirement time. It is looked after by the PFRDA (Pension Fund Regulatory and Development Authority).
NPS has two types of accounts, Tier-1, and Tier-2. Tier 1 is the pension account that has restricted withdrawals. Tier 2 is a voluntary account. It delivers liquidity for investments and withdrawals. Tier 2 is allowed only in the case of the subscriber having an active Tier 1 account.
The National Pension Scheme is not only an investment plan, but also it offers a couple of tax benefits. Up to 2 lakh can be saved from income tax during a financial year. This includes a deduction of 1.5 lakh under 80c and an additional 50k under 80CC1(B).
During exit or retirement, at least 40% of the corpus is compulsorily used to procure a pension for life by buying an annuity from a Life insurance company. The balance corpus is paid as a lump sum.
Recommended: NPS Withdrawal Rules - Premature Exit Rules
The LIC Jeevan Shanti Plan is a single premium annuity plan. Typically, an annuity plan offers a periodic and systematic payout for a certain period with a lump sum investment. It provides an option between a joint life deferred annuity and a single life deferred annuity. The LIC Jeevan Shanti can be utilized to obtain fixed payouts at regular intervals for the rest of their life.
A subscriber needs to pay a purchase price to buy an annuity. This is the Single premium price. LIC then pays a fixed price at regular intervals. The regular payout can be monthly, quarterly, or half-yearly.
It is an Equity Linked Saving Scheme. It comes under the category of mutual funds. Their major exposure is in equity-oriented securities. If you want to invest 60,000 in an ELSS, this 60,000 can be reduced from the taxable income under 80C. This will ultimately reduce the tax burden on the person. The lock-in period is 3 years. After the lock-in period is completed, the units can be easily switched or redeemed.
The HDFC Life Pension plan gives market-linked returns and loyalty add-ons. This makes it very easy to fulfill retirement goals. This plan enables the insured to manage funds in the long term so that they can enjoy a financially secure life.
Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a very famous fixed-income scheme for senior citizens of India for 10 years. This one-time deposit scheme was brought forward by the Indian government for people aged 60 years and above. However, personnel with voluntary retirement within the age bracket of 55 to 60 can also invest in the PMVVY scheme. The VRS option is only applicable to the Government or PSU sector employees. It can be bought, both online and offline through LICI (Life Insurance Corporation of India). The objective of PMVVY is to give senior citizens a regular pension during times of the drop in interest rates.
These are a few best retirement plans that you could think of investing in India. You can choose as per your requirements to protect your future. This is more important because financial independence, even after retirement, is the biggest reward you can give yourself after years of hard work. Stay prepared and welcome your golden age without any financial stress.
Disclaimer: The visitors are informed that this blog is written for information purposes. It is not investment advice. We only tend to provide unbiased information gathered from authentic websites and sources.