Retirement planning should form an essential part of your financial decision-making. As we grow older, job opportunities tend to reduce. However, the need for capital does not. With inflation, your savings will not be sufficient to last your whole lifetime. Therefore, you need to create a corpus to specifically fund your retirement and create an income source. Here is how you can ensure a monthly pension of Rs. 50,000 after retirement.Read more
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The pension amount will largely depend on the invested sum and the retirement age when you would want the pension to start. If you are in your 30s, you will have a larger time frame to invest, and therefore smaller investments to earn the returns in your 60s. However, if you plan to retire in just a few years, you would have to invest a larger amount to get the same kind of returns.
The choice of investment also plays a large role in determining the monthly income. Plans that invest in the equity market offer higher returns based on the market performance. However, the risk profile is greater because you may lose money if the market is underperforming. Examples include ULIPs, mutual funds, etc. To get a 50K pension per month, you would need to invest around Rs. 9000 every month for 10-12 years in such plans.
On the other hand, you have savings plans that offer guaranteed fixed income after retirement but do not invest in the market. Therefore, the risk profile is low to none. The returns are entirely dependent on how much money you invest and the interest rate.
The most ideal investment method to get a 50K pension per month would be to invest in a mix of high-risk and low-risk instruments. This way, even if the market is underperforming, you have a backup in place.
Another option for someone who wants a balanced profile would be to start SIPs. It’s a form of disciplined investment wherein you invest a fixed sum of money regularly in market funds. SIPs enable you to diversify your funds into equities and debt funds and are easier on the pocket.
The following investment choices can help you secure a monthly pension of Rs. 50,000 after retirement.
NPS or National Pension System is a pension scheme initiated by the Government of India to secure a financial backing for employees after retirement. This retirement savings scheme allow subscribers to save systematically to create an income source for the future.
Funds from individual investors are pooled and reinvested in the money market, Government bonds, corporate debentures, bills, and shares. This ensures additional returns from the market for the investor.
Once the investor hits his/her retirement age, (s)he can withdraw a percentage of the accumulated corpus as lump sum and invest the remaining amount to buy a life annuity from a life insurance company.
Let’s understand this with an NPS calculator.
Let’s say you are 30 years old and would like to contribute till you reach 60 years of age. Assuming that your expected return on investment is 10%, you would have to invest a monthly sum of Rs. 11,000 for 30 years to grow your total investment of Rs. 39.6 Lakhs to over Rs. 2.5 Crores.
Now, NPS requires you to invest a minimum of 40% of the accumulated sum to purchase an annuity plan. This brings your annuity value to Rs. 1 Crore. Assuming an annuity rate of 6% on this value, you can get a 50k pension per month from NPS.
These are market-linked investment cum insurance protection plans that offer attractive returns basis the market performance of the funds.
There are exclusive retirement ULIPs that offer an income source for you once the investment period ends. Additionally, a part of the premiums paid towards the plan is used for a life cover. The remaining is invested in a mix of equity and debt funds to generate increased returns.
Policyholders are given the choice to switch between funds if they are dissatisfied with the performance of the existing funds.
The maturity proceeds and the premiums paid towards ULIPs are eligible for tax exemptions under the Income Tax Act of India.
To get a 50k pension per month through a ULIP, you would need to invest around Rs. 11,000 to Rs. 12,000 per month for a period of 25 years to start earning your pension in the next 30 years.
Annuities are periodic payouts given to investors based on their amount of investment in an annuity plan. Annuities can be paid out on a monthly as an income for retirees to fund their daily needs. These are usually paid out throughout the lifetime of the investor.
Investment for annuity plans are done in a lump sum, following which annuities start flowing in.
There are usually two types of annuities - immediate annuity and deferred annuity. Immediate annuity plans offer monthly payments as soon as the investment period is over. Deferred annuities are those where payouts occur after a vesting period following the end of investments.
Given that the initial investment required is huge, annuity plans are most suitable for those who have a large corpus saved already and are looking for ways to generate an income stream for the future.
These are regular pension plans that also come with insurance protection. Pension plans offer a guaranteed payout every month following your retirement age. In addition, these plans ensure that your spouse and children are financially secure in case you are not around to take care of them in the future.
These plans offer a lump sum payout at maturity along with a monthly pension for 25-35 years following retirement.
To get a pension of 50k per month using a 100% guaranteed return solution, you would have to invest an equivalent amount for the next 10 years.
These plans can prove to be helpful for those planning early retirement.
These are also market-linked avenues of investment offering returns from the equity or debt market.
The risk of investment is solely borne by the investor. To balance out the risk profile, systematic investment plans (SIPs) are recommended.
Once the investor has accumulated sufficient wealth over the years through investment in mutual funds, they can use a portion to invest in an annuity plan. This will guarantee a lifetime income for the investor along with a life insurance cover.
Let’s understamd how you can get yourself a pension of 50k by investing in mutual funds through an SIP. Say that you invest a monthly sum of Rs. 12,000 for a period of 20 years. This brings your total amount of investment to Rs. 28.8 Lakhs. Now assuming an expected return rate of 12%, the total value of your investment at the end of 20 years may grow into Rs. 1.2 Crores. You can now reinvest a part of this earning into a pension plan to earn a guaranteed income of Rs. 50,000 per month.
*All savings are provided by the insurer as per the IRDAI approved insurance
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
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