All that You Should Know About Retirement Planning

The retirement phase is an important part of every working professional’s life. The time you hear the word ‘retirement’ all you imagine is relaxation and saying goodbye to the eight to nine hours shift.
But, what if you have not planned for this golden phase of life?

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Remember, the eight to nine working hours shift might come to an end but the everyday expenses will always be around. Therefore, it becomes important to plan for retirement.

Yes, retirement planning is important.  People with a job need to plan out their retirement so that they enjoy their life post-retirement and not worry about the expenses.

Lets’ Get Started!

The average age of a person starting with a job varies from 24 years to 26 years. Before you start planning your retirement, you need to understand your financial standing that includes your income, commitments, expenditure and debts or any liabilities. While you plan for retirement, take into account your health as well.

How to Plan Retirement?

It is advised that you should start planning retirement right from the time you start earning. When you start investing in the retirement fund at an early stage, it helps you to create a corpus for your retirement.  This will reduce the financial burden and let you enjoy the post-retirement with much ease. People usually take time to start a retirement plan thinking it is far away. And some even think it is not of much importance. However, it is a better idea to start investing in the early-stage when you have less financial responsibilities.

Decide an Investment Horizon

To decide the investment outlook, you need to have an idea that at what age you would retire. Then you calculate the number of years left for retirement. After that, you can decide until what age you want your expenses to hold.

For example: If you’re 26 years old looking forward to retiring at 50 and want to plan your expenses until you are 75 years old, so the horizon of your investment will be of 24 years and you’ll have to make sure that the amount you collect in these 24 years would be enough until you’re 75 years old.

Evaluate Expenditure

After this, you’ll have to evaluate your expenditure. You’ll have to plan things carefully and keep track of the everyday expenditures. The expenditure will include household expenses, the education fee of the children, if any and other miscellaneous expenses like transport charges, EMIs and so forth. 

There is a fund for retirement known as a contingency fund. It helps with medical expenses during retirement. In case you are not covered under health insurance then the medical expenses can be heavy on the pockets. Hence it is advised to have a fund for medical emergencies as well.

Don’t Use Retirement Funds

You never know what kind of emergency you get to face at any point in time. Life is uncertain and a common mistake that you would tend to make is using the fund, which you have kept aside for the retirement phase. 

At the risk of sounding like Arnab Goswami NEVER, EVER, EVER do this. Plan out the expenses and accordingly use the savings. 

Understanding the Types of Retirement/Pension Plans

There are different types of retirement plans that you can choose from as listed below:

Deferred Annuity

A deferred annuity scheme is a pension plan that allows the annuitant to collect a sum either by paying a premium regularly or by paying at once. When the policy tenure is completed, the pension is given to the annuitant. It not only offers benefits to the annuitant but also offers tax benefits that are subject to change as per the prevailing tax laws. In the deferred annuity, one-third amount of the whole sum is free of tax and two-third of the whole sum is taxable. In the deferred annuity plan, the amount is locked and cannot be withdrawn no matter what.

Immediate Annuity

As the name suggests, under this scheme, the pension is given immediately. The annuitant has to pay a lump-sum amount and the pension is provided instantly based on the amount invested by the annuitant. The annuitant has options to choose from for a range of annuity options. The nominee gets the amount in case the annuitant dies during the policy tenure.

National Pension Scheme

The National Pension Scheme was launched in 2004 by the Pension Fund Regulatory and Development Authority of India (PFRDA). In the initial period, this scheme was applicable only for the government employees but later in 2009; it was opened for all Indian citizens. Under this scheme, the beneficiary can withdraw only 60% of the total invested amount and the rest 40% will be used for purchasing annuities.

This scheme was introduced to safeguard the financial future of the people after they retire. NPS is popular due to its tax-saving benefits.

Pension Funds

It is a type of pension scheme that continues for a long period. The return offered within the pension funds is comparatively better upon maturity. The PFRDA has allowed 6 companies to manage the pension funds as fund managers. The pension fund scheme offers better returns when compared with others upon maturity and it remains active for a specific period. The pension funds insurance providers intend to empower the insured to pull back the annuity sum at the hour of aggregation stage. The pension funds will provide financial protection when you have stopped earning and need not compromise on the lifestyle.

Wrapping it Up

Planning for your retirement at an early age is the best you can do for the golden years of life. Retirement planning will let you live a stress-free life even. Choose the retirement plan that fulfils your need and gives you peace of mind. 

In the times we are living in today, it is recommended to buy a pension plan online offered by the different insurance companies in India.

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