Most of us want peace, comfort, and quiet in a good neighborhood with a loving family for retirement. But planning for it in advance is crucial. You need an income and a retirement corpus to help you sustain your lifestyle, enjoy and explore the world, take care of your health, and even deal with emergencies in your twilight years.
Pensions form a big part of retirement planning as they help you earn passive income to meet your routine expenses. There are other sources of income that people have, but those are high-ticket items which may have barriers to inclusivity and early-income earners cannot explore those. Hence, pension plans are the most popular retirement plan option available to you.
Let’s understand pensions and how you can secure a robust retirement income:
Retirement plans offer various functions that are available to most people. The entry barrier for a retirement plan starts at age 18. The maximum vesting age is around 80 years, depending on the policy that you choose.
The retirement plans are:
– ULIP or a unit-linked insurance plan: A dual-purpose investment tool that focuses on capital building and providing you coverage for your life. The premium you pay is invested in equity, debt or hybrid mode. The remaining portion goes toward securing your life.
– National pension scheme (NPS): This is a national scheme that allows you to invest money and create a retirement corpus for yourself. This retirement corpus will help you earn a pension. The premium you pay will go toward investments in various public market instruments.
– Traditional annuity based pension scheme: These plans are not linked to the market. They do not allow you to redeem the investment corpus at once but offer systematic withdrawal plans to help you use your pension fund better.
The annuity plans can be further diversified into immediate and deferred.
How do you choose a retirement plan from any of the above?
The best mix is always to couple a ULIP or a traditional annuity-based pension plan with the National Pension Scheme. The NPS offers tax benefits that allow you to create a huge retirement corpus.
If you have more risk appetite, you can go with a growth-focused investment in ULIP. The risk is high, however the chance of reward is also higher.
Choose a traditional annuity if you want to have options open and would like a tailored retirement plan.
Planning for retirement security and pension:
Pension planning is paramount. When you want to retire, here are other things that you can look for along with a pension:
– Comprehensive health insurance
– Term insurance (if needed)
– Emergency fund
– and other passive income plans
Apart from the above, you need to determine what you will be doing when you retire. This may seem absurd when you’ve read about how to make money for your retirement, but this is when you hit a pause, and your work is something you will not be able to do anymore. Plan for activities, trips, health and fitness routines, and more.
I am Arjun Kumar. I am the owner and administrator of Finance Gradeup. I have completed my education in Arts & Technology. Arjun Kumar usually has interests in playing games, reading and writing. He was a brilliant student during his college days. He also works for many private companies, but the main interest of Arjun Kumar is digital marketing. He thinks that reading is a must before providing any quality information to his readers. You can find Arjun Kumar on much social media handles online, or you can learn more about him in about us page.