Your‘re caught up in a rat race. Going to work, taking care of family expenses and you don’t realize days are flying by. You celebrate your 30th birthday, then a gala 40th birthday bash and so on. You are so busy with your career that, retirement planning is not anywhere on your priority list. But come retirement, it hits you like a thunderbolt. Bam! Why didn’t I plan for it before you think?
Most people start planning for retirement close to retirement age. They get so entangled with day-to-day expenses that they don’t think the day will come. A piece of advice, the earlier you start, the better it is. Age is an important factor for coverage and premium. The older you are, the higher is the premium rate and lower is the coverage. In addition to receiving any kind of interest, dividend and Provident Fund plan lump sum, it would be a wise move, to invest in safe pension plans as well.
Here are a few small steps that can help you formulate a comfortable retirement plan.
Assess Your Needs- Most people past would like to continue maintaining their current standard of living even after retirement. Yes, a few expenses may get eliminated like children’s education, loans, but a few new ones will have to be factored in, like health and medical expenses.
Make an Income Goal- Make a rough estimate of your income goal based on the regular expenses you incur plus a little extra put aside for emergencies. Set an income goal, then calculate how much income will be sufficient for you after retirement and work backwards.
Various factors come into play for determining an income goal. It depends on your current income level, retirement package from the employer, income disbursements from other investments, inflation etc. By doing so, we can get a ball park figure. Also take into account interest, dividends etc. from other investments.
Safe Assured Pension Plans- Invest in a safe assured post-retirement plan, like some sort of pension plan. If you are a person averse to taking risks, take a safe plan that is not market risk based. Contribute till maturity and reap regular returns till the end of your life.
Everyone’s needs differ. However, most people want to maintain their current standard of living. Retirement typically means a change in income and expense pattern. You may no longer be spending money on paying your mortgage bills or towards children’s education. However, you may end up with new kinds of expenses like a senior citizen health plan, health and medical expenses.
Experts say, one rule of thumb is that around half to two-thirds of the income you had during your working life is sufficient and a reasonable income goal. One of the safest ways to ensure a steady income and maintain a decent standard of living is by investing in a safe assured retirement pension plan. There are several types of pension plans available in the market today. Online pension calculators can help you compute your target income, to meet your retirement expenses factoring in your current retirement savings, and future contributions.
Different Types of Pension Plans:
- Pension Plans Offered by Employers- These are maintained by the employers, and will ensure an individual is protected from any uncertainty that may arise post-retirement.
- Deferred Annuity Scheme- A deferred pension scheme allows you to accumulate a principal amount through regular premiums or a single premium over a policy term. On maturity of the policy term, the pension will begin.
- Returns Based on Market Returns- High to low risk pension plans are available that are based on market returns. While some offer attractive pensions, others add loyalty benefits every alternate year in addition to the above.
- Smart Pension Plans- This plan allows an individual to invest a regular sum of money and regulate a constant sum of income post retirement.
- Immediate Annuity Plan- It is an immediate annuity scheme, where pension begins immediately from the maturity date. It’s higher age bar, ranging from 50 to 80 years is a great option for late birds. This plan also gives attractive payment options like paying one lump sum or deferred payments, like monthly, quarterly or half-yearly. In the event of death of the policy holder, the same option can be transferred to the nominee without any hassle.
There are several new schemes and pension plans that are being added to the choice bucket list each year. Government and several nationalized and private banks today, also offer attractive plans that are tax deductible or tax free. You would be happy to know that, the premium amount paid for the plan is exempt under the section 80 CC of the Income Tax Act.
So, be an early bird, start with a pension plan scheme young. Pension schemes are available for an individual from as early as 18 years to as late as 65. The earlier you begin; the lower is your premium and better is your return. You stop working and so does your income at retirement. But that does not mean you make your money stop working for you. Keep your later year comfortable and live with pride and dignity. Good luck!