What Is A Retirement Plan?
Retirement plans from life insurance companies, work in two ways – help you build a corpus during your earning years when you are able to save, and invest towards building your retirement corpus, in a way that it provides you with financial support throughout your retired years. During the accumulation phase, a retirement plan invests your money, which over the long term generate appropriate returns and help you build a significant corpus for retired life. In the post-retirement phase, through an annuity product, you can get regular income for life
Benefits Of Early Retirement Planning
There are several benefits of retirement planning ranging from monetary to personal advantage, like bringing in a financial discipline. Here are the key points on why is it necessary to plan for your retirement early:
- Retired life is all about pursuing your interests, traveling to new places and enjoying a relaxed and comfortable life. Retirement planning in advance ensures that you are able to comfortably provide for your needs, healthcare expenses and also live a retired life of your dreams.
- The earlier you begin planning and saving for retirement, the more you can reap the benefits of the power of compounding, which goes a long way in enhancing your returns on your earnings.
- The other major advantage of retirement planning is the tax advantage both during the accumulation phase and later while reaping the returns after retirement. Premiums for retirement policies qualifies for tax deduction under Section 80CCC of the Income Tax Act 1961, subject to provisions contained therein. Further, when you reach vesting age, you can get up to a third of the retirement savings as a tax-free lump sum under Section 10(10A) of the Income Tax Act 1961, subject to provisions stated therein.
- Retirement planning is crucial to ensure that inflation doesn’t derail your dream retired life. By investing systematically, you can ensure that you are able to accumulate significant corpus to fulfil all your dreams and aspirations and to live a comfortable and worry-free retired life.
- The rising life expectancy means that you need to save for a longer retired life. Judicious retirement planning is essential to enable you to live a long and prosperous retired years, with adequate financial support during those years.
Tips To Choose An Appropriate Retirement Plan
Age of retirement
The average age of retirement in India is typically between 55 to 60 years. However, today the concept of retiring early is also becoming common which means one requires a steady post-retirement income for a longer time. Further, with an increase in life expectancy, you need a corpus which will ensure you continue with the same standard of living as long as you are alive. Also, with more and more people opting for nuclear families, one needs to be independent to take care of oneself and their dependents. Hence, whatever age you decide to retire, accumulation of wealth corpus is essential. You can use our retirement fund calculator to find out how much corpus you will need to live a comfortable and worry-free retired life.
ROI during earning years
The sooner you start, the more will be your savings for retirement. The risk-taking capacity is also comparatively high when you are young. Your retirement corpus and income received post retirement should be such that helps you take care of the day-to-day expenses, any health contingencies and maintaining the same standard of living. Confused about what should be your ideal corpus? Use our calculator to find out how much you need to accumulate for a dream retired life.
Expenses after retirement
The health expenses are likely to increase as you and your spouse grow old. Besides, inflation will also lead to an increase in the cost of living. Your savings may be the only source of income you may have after retirement, so investing in a disciplined manner is highly recommended to ensure you are able to meet expenses, factor in inflation, and live a fulfilling retired life.