Know Why Retirement Planning is Important

Retirement plans are also referred to as the pension plans and are the investment plans wherein one needs to invest a part of the savings to accumulate over a period. The key intent is to provide financial security during the golden phase of life that is retirement.

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The right retirement planning will let you live life without compromising on the living style even after you have stopped working. In the times we are living today and the rising inflation rate, it is prudent to start the retirement planning at the earliest.

We all know that emergencies do not come with prior notice and in case of any, you might run out of savings. Therefore, invest in the right investment pension plan and ensure the seamless lifestyle even after retirement. Investing in the right retirement pension plan provides with the multiplied sum of money owning to a compounding effect, which adds up to the differences in the final aggregation of savings. Henceforth, choose from the retirement pension plans that align aptly with your expenses and income.

Understanding the Retirement and the Pension Plans

Most people do not put much emphasis on the benefits of a retirement pension plan. They do not look beyond what would happen when they ideally would stop working. Well, in case of a retirement plan it should not be initiated when you get older, rather the early, and the better.

When you begin early, it ensures the substantial retirement corpus for the golden phase of life. When you think about retirement planning, the right retirement scheme is of utmost importance. On the premise of the scheme benefits and structure, the retirement plans are further classified. Listed below are the different types of pension plans in India:

  • Immediate Annuity

    Within this scheme, the pension is provided to the policyholder. All you need to do is pay the lump sum amount and the annuities initiate immediately. In case the policyholder passes away, the nominee will receive the money.

  • Deferred Annuity

    It is a type of pension scheme, which permits the substantial building of the retirement corpus via regular or single premium payment over the policy term. One can also avail the tax benefits that are associated under this scheme and the regular annuities can be received towards the end of the phase of accumulation.

  • Life Annuity

    Within this, the pension sum is paid to the policyholder until the demise. In case you opt for the ‘with spouse alternative’ the pension sum and then will be provided to policyholders’ spouse.

  • Annuity Certain

    Within this, for a certain number of years the annuity will be paid to the policyholder. It depends upon the policyholder the period they would choose and in the case one passes away before the completion of the payment then the annuity will be paid to the nominee.

  • Guaranteed Period Annuity

    Within the guaranteed period annuity, the annuity is provided to a policyholder for a specified period such as 5-years, 10-years, or so regardless of whether the policyholder survives or not the duration.

  • Pension Funds

    The pension funds are the types of pension schemes that pay up for the retirement commitment of the employees and remain in effect for a long-term. One of the key highlights of such a scheme is that the returns offer better returns upon maturity.

  • With/ Without Cover Pension Plans

    The life cover pension plans are those type of plans, which pays the lump sum amount that is assured to the beneficiary in case of policyholders’ untimely demise. Next, without cover pension plans do not assure the guaranteed lump sum in case of policyholder's untimely demise. However, the premiums are paid to the nominee.

  • Whole Life ULIP

    As the name suggests the money invested stays for the whole life of the policyholder. At the phase of retirement, partial withdrawals can be made and avail tax-free income. Additionally, the withdrawals are permitted whenever needed.

  • National Pension Scheme

    It is the pension programme that was initiated in 2004 January by the Central Government. Any public, private or the unorganized sector employees can easily invest in the scheme except the employees of the armed forces. Within the scheme, you can invest in the pension account at a specified interval while employed. The policyholder can easily withdraw the certain percentage of the amount accumulated post-retirement. Once you are retired, the remaining sum will be received as the monthly pension.

The Bottom Line

When it comes to financial planning, retirement planning is an important part of it. The harsh reality is that sooner or later the professional life will end. This will be the time when you will rely on the savings and investment made.

Therefore, it is of prime importance that retirement planning is done judiciously so that you can enjoy the golden phase of life without worries. With the advancement of technology, select the best retirement pension plans that fulfil your needs.

Retirement is an end to the everyday struggle of the salaried individuals. With the right retirement pension plan in place, you will be financially independent even when there is no incoming salary every month. Retirement planning is crucial to enjoying the blissful retired life. A proper plan for the retirement will determine the retirement income objectives and then accordingly design the achievable path to avail the benefits.

Written By: PolicyBazaar - Updated: 19 August 2021
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