Are you really scared of the moment when your income ends? Most of us want to cash in on the years as we grow older and don’t get into the situation of being a financial burden to others. Are you thinking the same? Well, you have come to the right place
Sowing the seeds for later in life is, metaphorically speaking, just like planting a tree. If you plant a tree today, it will give you shade and fruit when you grow old. But the fact is that, in India, we have different ways to save for our “old age.” Also, as a matter of fact, today the best pension plan options are under review, and we also look at how life insurance can continue to keep you.
What is the use of a pension plan?
We are gradually switching to a different lifestyle in India. Every year, the prices of food items and medicine increase. Earlier, the days when families were big and even the elderly ones were taken care of jointly; now, the large number of people are leading a small family life, which also means that you have to have your own savings.
A pension plan gives you a regular income every month once you retire. It is like getting a monthly salary even when you are not going to an office.
Leading schemes of government for your retirement
National Pension System (NPS)
NPS is considered one of the schemes in India that is recognised, besides being very focused on the return at the end, it is also quite safe, being under the control of the government. One of the distinctive features is that the entry point is quite broad, ranging from 18 years to 70 years. You will need to make small payments to your account on a regular basis, and the money is looked after by the professionals. At 60, you will have the option to make a full withdrawal of a major portion of the accumulated fund, while the balance will remain for the annuity phase, which will pay you a monthly pension for the rest of your life.
Atal Pension Yojana (APY)
If you prefer receiving a fixed, assured sum monthly, this is the right scheme for you. It was initially designed for informal sector workers; however, any Indian citizen aged 18 to 40 can register. You decide the pension amount, such as ₹1,000 or up to ₹5,000, and make a monthly contribution. Upon reaching 60 years, the government will pay you that specific amount every month without fail.
Public Provident Fund (PPF)
PPF can become your go-to for long-term financial security even though it is not a pension product. Perhaps it is the only one that guarantees maximum safety as it is supported by the government. Besides providing a considerable rate of interest, the biggest advantage is that your final withdrawal is entirely exempt from tax!
Life Insurance and Retirement
Sometimes people wonder, “If I am planning for a pension, why should I buy life insurance?” The main reason is protection. Long life is a risk that the pension plan covers. On the other hand, life insurance is there for the family if the breadwinner dies unexpectedly. A lot of pension schemes nowadays include life coverage as well. In other words, they are “Pension Plans with Life Cover.”
In case the income earner dies suddenly, the family receives a lump sum to cover household expenses or children’s education. And if the breadwinner lives till retirement, he/she will start receiving pension payments. This way, everyone benefits.
Choosing the Right Plan from Private Companies
Besides taking advantage of government schemes, partnering with well-known private bodies like LIC, HDFC Life, and ICICI may be a good idea, as they offer a wide variety of plans to accommodate your requirements.
Just retired and have a good amount of cash saved. An Immediate Annuity might be just the thing for you. In fact, you make a large payment only once and then get your monthly pension as of next month. It’s perfect for those who want their money instantly.
And if you’re still young, then a deferred annuity is more suitable. This way, you can contribute smaller amounts over many years, which you spend while working. Here your money gradually increases in value, and you benefit from it in the form of a pension at the time of retirement.
There are also ULIP Pension Plans for those individuals who want their money to grow faster and are willing to take a little risk. With these plans, your funds are invested in equity market. That can lead to higher returns, but the market fluctuations also impact the value of your investment.
Simple Steps to Choose Your Plan
- Start Early: If you start at age 25, you only need to save a small amount. If you start at 45, you will have to save a lot more to reach the same goal.
- Check the Fees: Some plans have hidden costs. Always ask your agent about “policy charges” or “management fees” before you sign.
- Think of Inflation: ₹10,000 is a lot of money today, but in 20 years, it might only buy a few bags of groceries. Choose a plan that has the potential to grow over time.
- Buy a Term Plan: Always have a separate, simple life insurance policy called a Term Plan. It is the cheapest way to keep your family safe and ensures they are taken care of no matter what.
Conclusion
Choosing the right pension plan is not a game of chance. Rather, it is about making an informed decision now so you can enjoy your time later without worries. Should you desire absolute safety, NPS or PPF would be your options.
For a secured fixed monthly income, Atal Pension Yojana may be the way. And it is always a good practice to have a life insurance policy in place to secure your family’s aspirations. Begin now. Saving as little as ₹500 monthly can lead to a substantial amount at the age of 60. You will be glad for your prudence today, your future self will.