Pension plans play a vital role in providing a comfortable & financially secure retirement, ensuring a regular source of income when they are not working. Both pension & retirement plans are part of life insurance plans, which fulfil an individual’s post-retirement requirements. Retirement Planning means planning towards the financial future post-retirement, which will include setting objectives & assessing the income requirements & expenditures. This will help manage funds, ensuring financial support for the individual during retirement tenure.
Benefits of Buying a Retirement Plan
Provided below are the benefits of buying a retirement plan:
Guaranteed Returns Benefit
Get guaranteed regular source of income once you retire without worrying about the delays.
Financial Security for Your Family
The family members will receive the death benefits in case of the sudden demise of the policyholder. In the case of a joint annuity plan, the death benefit would be received by the second annuitant if the first annuitant dies.
Flexible-Premium Payment Terms
It allows you to opt for flexible premium payment options & terms that can be opted.
Creation of a Stream of Regular Income
It helps create a regular source of income, either as a lump sum or in monthly form, to meet routine expenses.
Get tax Benefits
Get different tax deductions & exemptions based on the type of pension plan bought.
Customise your Retirement Plan
It allows you to customise the policy by adding the critical riders at an added premium.
Secure your Property & Assets
If you have planned your retirement well in advance, you will be able to secure your assets & property, i.e. you will not need to sell them off.
Who Should Invest in Retirement Plans?
Provided is the list of individuals who should invest in the retirement plans:
Individuals seeking tax benefits
The amount paid towards the annuity plan is eligible for a tax deduction under section 80C to a maximum of INR 1,50,000. The policyholder must have opted for the old tax regime to get the tax deduction u/s 80C & 80CCC. Hence, the policyholder who has opted for the new tax regime cannot avail of deduction under sections 80C & 80CCC.
Also, during the vesting stage, a policyholder is allowed to withdraw 60% of the accumulated amount without any tax, & only the remaining amount would come under taxation.
Young professionals
Young professionals will get lower premium benefits, long tenure, & disciplined financial patterns. As the responsibilities are lesser at a young age, planning for retirement becomes easier.
Bread Winners
The breadwinners should take care of their family members by planning to buy retirement plans.
Parents
The parents should also plan their retirement for their children’s upbringing or education so that the lives of family members don’t get affected in case of their sudden demise.
Steps to Buy Retirement Plans
Follow the below steps to buy a retirement plan:
Step 1:Evaluate Your Retirement Goals
Initially, evaluate your retirement objectives by analysing the lifestyle you visualise during your retirement period & make an estimate of the expenses that would be incurred. Also, identify the correct age of your retirement & select a pension plan that best suits your requirements.
Step 2:Understand Different Retirement Plan Options
Evaluate the options available, i.e. Pension or annuity plan & choose the one that best suits your financial requirements.
Step 3: Seek Professional Financial Advice
One can also seek professional advice from a financial advisor regarding the complexities involved, if any, in the retirement plan. He will also help evaluate the present financial situation & choose the perfect plan as per your financial requirements.
Step 4: Compare Plans & Providers
Compare the different retirement plans available in the market on the basis of fees charged, customer service, investment options, reputation of insurance service provider, flexibility offered, etc.
Step 5:Review the Plan Documents
Review the documents related to the pension plan by reviewing the terms & conditions related to the contributions, withdrawals, penalties charged, etc.
Step 6: Make Premium Payments & Monitor Your Plan
Next, monitor your pension plan & make regular premium payments towards your plan. Always consider a payment schedule to make timely premium payments & stay updated.
Step 7: Periodically Re-evaluate Your Retirement Plan
It is important to make a continuous evaluation of the plan to ensure it aligns well with your financial objectives.
Eligibility Criteria
Provided are the eligibility parameters that are to be met to buy the Retirement Plans:
- The minimum age to start with a retirement plan is 18 years, but in some cases, it is 30 years.
- The maximum age allowed to buy a retirement plan is 75 years.
- A minimum premium is to be paid by the policyholders, as the pension amount depends only upon the amount of premium paid.
- The vesting age, i.e. the age at which the policyholder will start getting a pension, is generally 40 years, which can change as per the insurance provider.
- Some insurance companies also consider employment status, i.e. whether the present employment status of an individual is working, self-employed, or retired.
Documents Required to Buy a Retirement Plan
Provided below is the list of documents required to buy a retirement plan:
Age Proof
- Passport
- Driving License
- Birth Certificate
- High School Certificates
Identity Proof
- PAN Card
- Aadhaar Card
- Driving License
Address Proof
- Driving License
- Electricity Bill
- Passport
- Aadhaar Card
- Telephone Bill
Income Proof
- Salary Slips for the last 3 months
- Bank Account Statements for the last 6 months in case the salary is credited with the employer’s name
- Income Tax Return for the last 3 years
- Medical Condition Proof
- Latest medical reports
Conclusion
Retirement plans have become quite important in today’s life as they offer financial security during the retirement tenure. As there are many options available, one can choose a retirement plan depending upon their financial needs& lifestyle envisioned post-retirement, making their lives comfortable.
