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Overview

Retirement planning. Is it so important in life?

Picture this; you are in your 60s, sitting with your loved ones at your favourite destination, enjoying drinks and watching your grandchild playing. Or, you are dependent on your child for your day-to-day expenses. We are sure you want to avoid experiencing the second instance. You have lived your life on your terms; why not secure your future and be prepared to live it like a boss? Retirement planning is the first and crucial step in life, as you only get to retire from work, not from your liabilities.

Make it possible with the right planning and intelligent choices for your golden days. Continue reading to learn what retirement planning is and which plan is best for you to gain financial security post-retirement.

What are Retirement Plans?

Retirement plans or annuity plans are a type of life insurance that helps save your hard-earned income for the most curious time, your golden days. Retirement planning at the right time can help you gain financial stability by saving a corpus for your post-retirement. You will get a lump sum or a fixed instalment amount in definite intervals after your retirement. A good retirement plan helps beat inflation, keep your investment safe and maintain a standard of life.

Types of Retirement Plans:

Once you’ve made your decision, you can start exploring the best retirement plan in India to invest in that perfectly complements your financial goals. There are different retirement plans with varied benefits. Let's have a look at the types of retirement plans in India and help you to make an informed decision:

01

Insurance-Based Plan

These plans are mainly considered the personal pension plan and can be bought directly from the insurance company without the interference of the employer or any government body. The insurance-based plans provide both death benefits and retirement benefits. These are further divided into the following categories:

 

  • Deferred Annuity:

    A deferred annuity is a life insurance plan allowing you to save a corpus through a single or regular premium over a policy term. Once the policy tenure is completed, you will get a fixed lump sum or a regular amount after the policy's maturity. The amount paid in the deferred annuity is locked and cannot be withdrawn in an emergency. On an early withdrawal, extra charges will be applicable. Three types of deferred annuities are available: fixed, indexed, and variable.

    1. Guaranteed income
    2. Payment flexibility
    3. Life cover

  • Immediate Annuity:

    As the name suggests, the immediate annuity plan will make you eligible for instant benefits once you pay the lump sum amount as mentioned in the policy. An annuity payment is flexible depending on the choice of policyholder, viz, single, monthly, quarterly, or half early.

    1. Immediate income
    2. Death benefits

  • Certain Annuity:

    Under this life insurance plan, the annuity is paid to the annuitant (policyholder) for a pre-specified period. The annuitant can choose the number of years to receive the payment for themself or the nominee.

    1. Higher returns

  • With or Without Cover Pension Plan:

    As the name mentions, these two types of pension plans come up with life-cover benefits. If you choose a pension plan with cover, the beneficiaries will get a lump sum amount after the death of the plan holder. If you choose a plan without cover, only the corpus built (till death) will be paid to the nominee.

    1. Life insurance cover
    2. Flexibility
02

Employment-Based Retirement Plan

This kind of retirement plan provides the benefit of working in some companies. In such plans, both employer and employee contribute an amount to create a retirement benefit for you, including a share of your salary and the remaining from the employer. The employment provident fund is the perfect example of an employment-based retirement plan.

03

Public Provident Fund:

You can buy a PPF plan from a pension fund regulatory or any government-recognized development authority. The period of PPF is 15 years, and you can make a yearly payment of a minimum of Rs. 500 to a maximum of Rs. 1,50,000. Once the tenure is over, you can extend it by 5 years as often as possible. A PPF also provides you with tax benefits as defined under Section 80C of the Income Tax Act.

04

Whole Life ULIPs:

These are the best and most-opted retirement plans as they provide both life cover and investment. These plans keep your money invested the whole life; after retirement, you can make partial withdrawals and withdraw anytime you require, and the money is entirely tax-free.

Benefits of Retirement Plan:

We have mentioned some high-yielding benefits to give you better clarity why retirement plans work best for you:

  • Save for a little longer

    If you make investment decisions at a young age, then you have the ultimate benefit of saving your money for a little longer than ever. Your reserves are ensured.

  • Make your own decisions

    You are independent to make your own decisions while witnessing the red flags in your life. Also, make your own decisions about how to live your life post-retirement, even when your income window is closed.

  • Relieve the burden on your children

    In the era of the nuclear family, you will ultimately leave a burden of your expenses on your child if you have not pre-planned your retirement. Planning your retirement will help your children reduce the burden and provide peace of mind to you and your child.

  • Negate the effect of inflation

    Your savings are saved from the market no matter how it performs or even if knocking the inflation. You can get a lump sum or a fixed amount in a definite interval.

  • Tax Benefits

    Under Chapter VI-A of Section 80C, 80CCC, and 80CCD of the Income Tax Act allows saving taxes on income gained from any retirement plan. Some of the plans also allow the exclusion of taxes on the withdrawal of interest. Also, the maturity amount is saved from taxes.

List of Retirement Plans in India

Here’s the list of retirement plans offered by prominent life insurance companies.

Why is it Important to Plan Your Retirement?

Retirement planning is essential in setting your long-term and short-term financial goals and how you will achieve them. With time, the value of liquidity generally depletes if it is not invested. With retirement planning, you can identify different income sources, set your financial objectives, and calculate your estimated future expenses to manage your risks and assets. There are specific common goals that every individual wants to achieve with retirement planning:

  • Fulfil your family's financial needs even after your retirement.
  • Be prepared for any aspect of wealth or health emergency.
  • By investing in the right retirement plan in India, maintain a good lifestyle by checking off your bucket list.
  • Provide death benefits and riders just like insurance cover.
  • Take full advantage of compound interest.

You may also like to read more about: 1 Crore Term Insurance Plan

How do Retirement Plans Work?

Unlike any other investment and saving plan, you are responsible for making premiums for a pre-decided period per your chosen retirement plan. A retirement plan will ultimately decide the accumulation of the funds you will receive. After your plan completes the maturity period, you will be eligible to get the benefits as mentioned:

  • By withdrawing the entire amount in one go.
  • Purchase an annuity plan.
  • Partially withdraw the amount and invest the rest in the annuity plan.

There are some significant points to remember if you want to surrender your retirement plan:

  • This charges a cancellation fee from the amount.
  • If you surrender the plan after 5 years, you will continue to receive the interest.
  • If you surrender the plan before 5 years, you must buy a deferred or immediate annuity plan.

Learn more about: Top 10 Pension Plans in India

Step-by-Step Guide to Choose the Best Retirement Plan:

Besides the ease of selecting from multiple retirement plans available in India, selecting one that fits your expectations can be challenging. To make it easy, systematic planning is essential. Here are quick steps you need to consider while planning your retirement:

  • Step 1: Select your retirement age: Choosing the proper retirement depends on your financial situation, responsibilities, and goals. If you wish to retire early, you should have reasonable savings that help you to live your post-retirement comfortably.
  • Step 2: Calculate your budget: No one knows your expenses and financial needs better than you. You are well aware of your monthly expenditure, all your spread income sources, the debts you bear, your medical conditions, and your life goals. Remember that you need more survival cash than you earn now after retirement. Gathering all the information mentioned will help you figure out your retirement budget.
  • Step 3: Determine retirement saving target: Once you determine your budget, you must determine the retirement saving target. This will help you to get a clear idea of how much investment you need to make in your retirement plan. Remember to measure the future value of the amount after calculating the inflation. If you need help deciding on the right target, contact us directly at RenewBuy.com.
  • Step 4: Calculate your retirement corpus: Retirement corpus is the total amount you must save after retirement to meet your financial obligations. The best way to calculate your corpus is to take your current monthly expenses and extend them to the retirement age, including inflation.
  • Step 5: Life expectancy: No fixed life span can be considered, but higher life expectancy will lead to higher retirement financial goals. Better to estimate your age, medical conditions, health issues, and other parameters.
  • Step 6: Plan ahead of retirement: Your retirement planning should start around 10 to 15 years before your retirement age, and this gap will help you plan and save a good amount of finances for a secured post-retirement. The earlier you plan, the longer funds you can accumulate for a secured post-retirement life.
  • Step 7: Consider risk tolerance: Investment may come with multiple risks, and you must know them. Before opting for a retirement plan, calculate your risk tolerance capacity to save yourself from disasters.
  • Step 8: Choose a plan for you: Now, it's time to choose a perfect retirement plan that fits your goals. There are multiple plans to compare in the market. To smooth this process, POSP experts at RenewBuy can help you better.
  • Step 9: Keep track of your plan: Regularly monitor and update your retirement plan considering all the expenses or any fundamental changes observed.

Eligibility for Retirement Plan in India:

There are specific key points that you need to fulfil before buying a retirement plan in India. Some of them are mentioned below:

Age: Different age criteria exist for different insurance companies' entry into a retirement plan. Generally, the minimum age is 18, but some companies set the entry age as 30, and the maximum is 70 years.

Premium: There is a minimum premium amount that a policyholder needs to pay, which will determine the pension amount.

Vesting Age:The age when the policyholder starts getting a pension is the vesting age. Generally, it is set at 45 years or varies per company norms, and the maximum vesting age is set to 80 years.

Documentation: While purchasing a retirement plan, you need to provide some documents, including proof of address, age, identity, and income.

Claim Process for Retirement Plan

After crossing the retirement age, one can file to claim retirement benefits. In case of a health emergency or demise of the policyholder, the claim should be filed immediately within 15-30 days. Here's the general claim settlement process:

  • Reporting of Insurance Claim
  • Review of Insurance Claim
  • Settlement of Insurance Claim

Firstly, report your claim to the concerned insurance company online or via letter.

The staff will look into the claim and guide you through the process. Also, they will update you about any requirements or pending documents you need to update.

Once they have gone through and are satisfied with the information you provided, the insurance company starts the claim settlement process.

Know more about how does life insurance claim process work?.

Why Choose RenewBuy to Buy a Retirement Plan?

Comparing and going through the complicated policies of retirement plans may be challenging for you. Our experts at RenewBuy can guide you through the process anytime. Compare and Pick the Best:

We instantly help you select the best fit for your life goals from the multiple retirement plans available.

  • Best Experts

    You can count on our trustworthy advisors near you, who keep your life priorities first.

  • 100% Assured

    Get safe and reliable policies regulated by IRDAI.

  • 24X7 Claim Assistance

    Connect with our advisors to make your claim process hassle-free.

Final Words

Promising yourself a stress-free post-retirement life rather than worrying about future circumstances is better. With RenewBuy, plan your retirement and be ready to bear all the bills by yourself without any compromise.

Life Insurance Companies

SUD Life insuranceSUD Life Insurance
LIC Life insuranceLIC Life Insurance
Bajaj Allianz Life InsuranceBajaj Allianz Life Insurance
Bharti Axa Life InsuranceBharti Axa Life Insurance
Exide Life Insurance companyExide Life Insurance company
HDFC Life InsuranceHDFC Life Insurance
ICICI Prudential Life InsuranceICICI Prudential Life Insurance
Max Life InsuranceMax Life Insurance
Kotak Mahindra Life InsuranceKotak Mahindra Life Insurance
Reliance Nippon Life InsuranceReliance Nippon Life Insurance