- Retirement plans are also known as pension plans
- Pay premiums in your work life to get regular income after retirement
- Choose the retirement plan that suits your needs and requirement
Ashish, 28, plans to retire at the age of 58. He has built his portfolio with savings in Fixed Deposits and Public Provident Fund. However, an advertisement on retirement plans gets him thinking about creating a regular source of income during his retirement years.
Based on his study, Ashish intends to purchase a retirement plan from an insurance company. Every year, he will contribute a certain amount to the plan and the funds will accumulate. With 30 years until retirement, he will achieve better returns thanks to the compounding effect. Once he reaches the end of accumulation phase (vesting age), depending on the plan chosen, Ashish can withdraw up to 33% of accumulated funds in lump sum. The balance funds will be used to pay him a monthly income for the rest of his life.
If Ashish can plan like that, so can you.
Here we give you the why, what, and how of retirement plans for you to make an informed decision.
What are retirement plans?
These are specially designed investment plans that let you save money, until you retire; to reap the fruits you had sown. From the day you buy a retirement plan, you contribute a certain amount to it on a regular basis. When your income stops on retirement, you start getting a steady income at regular intervals from your retirement plan. Very often, these plans also provide life insurance cover. Thus, along with wealth accumulation you also get life insurance cover.
How are retirement plans paid?
Retirement plans can be paid by single premium or systematically at regular intervals. Every retirement plan comes with its own benefits and payment modes. Before buying any plan please read the sales brochure carefully.
As you review retirement option plans, you are likely to hear these three common terms:
Accumulation phase: The period you are paying premium to build a retirement corpus. These are your working years when you earn a steady income.
Vesting age: The age you choose to start receiving pension/income. Ashish proposes to retire at 58. So that would be his vesting age.
Annuity phase: The period after your retirement when you receive the pension/income.
Types of retirement plans
Deferred and Immediate Annuity
Deferred annuity plans let you accumulate funds in your working years and offer pension after retirement. The contribution can be made by paying single premium or systematically at regular intervals. In case of immediate annuity plans, you pay a lumpsum amount to the insurer and the pension begins immediately.
Benefits of retirement policy
Every retirement policy comes with its own benefits and special features. However, there are some shared benefits across all plans. Firstly, they ensure guaranteed income in your golden years. This income can take care of your daily expenses. Secondly, the facility of lump sum withdrawals offered by certain plans comes handy when you need to make bulk payment for reasons like child’s higher education or marriage. Thirdly, most retirement plans offer you tax benefit. The premiums paid for some policies are exempt from tax.
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Best Retirement Plan
After analyzing your requirements and considering your retirement corpus goal you must consider Exide Life Guaranteed Wealth Plus. The plan offers plethora of benefits which can set you financially free in your retirement days. Read about the product here and take an informed decision.