Pension Plans are a category of life/annuity plans that are specially calculated to meet your post-retirement needs, such as medical and living expenses. You would want to maintain the same lifestyle post-retirement. There could be a surge in your day-to-day expenses due to a surge in inflation. You would also have post-retirement dreams such as traveling the world, pursuing a hobby, starting a new-fangled venture, and more. By planning in advance, you can be financially prepared for your retirement.

This is where pension plans/retirement plans come in. Both pension plans and retirement plans are a category of life insurance plans that are specially calculated to meet your post-retirement needs. To ensure that you can enjoy your golden years through financial independence, these plans help cover your expenses and secure your future.

Why do I need to plan for my retirement?

Increasing retirement years

With average life anticipation increasing in India, it has become increasingly important to plan for a longer retirement. The life expectancy figures show how long an average individual lives. In India, the average life anticipation of a person aged 60 is 18.022 years. This means that an average Indian lives up to the age of 78. Hence, you need to jump-start planning in advance to maintain your lifestyle and take care of other expenses for such a long duration.

Medical expenses

A major worry with increasing age is unanticipated medical expenses. Rising medical costs can be difficult to achieve unless you plan for them in advance.

Financial independence post-retirement

You would like to live your life on your own terms after your retirement. However, more than 65% of individuals above the age of 60 depend on others for their daily expenses. This shows how vital it is to plan for your retirement and ensure your financial independence.

Benefits of Retirement Plans:

• Benefit from the power of compounding: The earlier you participate in a retirement plan, the longer your money gets to grow. Also, the interest earned over time gets re-invested to produce more returns. This is called the power of compounding. This provides you with a larger amount for your retirement.
• Safety net from unexpected events: Retirement plans ensure that you are financially prepared in case of an emergency. They also provide financial support in situations of critical illnesses or permanent disability due to an accident.

Define your goals:

You want to stay financially independent even during your retirement. You want to continue your current lifestyle, meet medical expenses, and meet your post-retirement goals such as buying a house, traveling, pursuing a hobby, starting a new venture, and more. Defining the goals that you want to meet during your retirement can help you plan accordingly.

Calculate the amount you will need:

Basis the goals you want to meet during your retirement, you need to calculate the amount that you will need to meet your goals. It is important to factor in inflation in this calculation. Knowing the amount that you will need will help you calculate the amount that you need to invest today to meet your retirement goals.

Choose your retirement plan:

Look for a plan that can provide you with a fixed income during your retirement. The income should be able to ensure that you achieve your post-retirement goals comfortably. In addition, check if your retirement plan offers you features such as the flexibility to invest monthly, half-yearly, yearly, or all at once, at your convenience. You may also want features such as the return of purchase price at maturity, cover that includes your spouse, and more. Choose a plan that meets your requirements.

Purchase

This can be done online or offline. You will need to submit relevant documents like identity and address proof, income proof, and others. Also, based on your retirement plan, you will need to pay your premiums monthly, half-yearly, yearly, or all at once

How do I choose a pension plan?

It is important to have enough money to ensure your financial freedom during your golden years. Based on your post-retirement dreams and goals, you may require the money either in the form of a lump sum, a regular income, or both. Understanding the factors below will help you choose the pension plan that best suits your requirements.

Returns from the plan

It is ideal to look for plans which offer higher returns. A plan that you invest in should provide high returns and be able to cover your post-retirement needs.

Guaranteed pension

Risk appetite decreases with age. For your retirement, you may want to invest in a plan that provides guaranteed returns, free from market fluctuations. This will help ensure that your post-retirement goals are fulfilled, no matter what. Some plans offer guaranteed pensions not just to the policyholder but also to the spouse in the event of an unfortunate event. Such plans ensure financial independence for you and your loved ones.

Bonus and other benefits

Most retirement plans offer bonuses and benefits for staying invested. These bonuses and benefits that you get over the years will add to the returns from the plan and provide you with a larger retirement fund. Hence, it can be beneficial to go for a plan that provides you with these benefits.

Key Takeways

You can purchase a retirement plan from the convenience of your home or office in just a few steps. The features and benefits of all plans are available online. You can compare multiple plans, check the premium, and make an unbiased decision.