Buy Retirement Plans & Pension Plans Online in India 2024
Retirement plans are life insurance products designed to act as investment plans to allocate a part of your savings to accumulate over a period and provide financial security after retirement. Read More
What are Retirement Plans or Pension Plans?
Retirement plans or pension plans are a specific type of insurance policies that help you live a comfortable retired life. These plans provide protection and also act as investment policies that help you accumulate a corpus to meet your post-retirement needs such as medical expenses, living costs, etc.
These plans invest your earnings over the years and create a fund, which you use a lump sum or in parts during retirement. With adequate investment and proper planning, you can easily plan your golden years and secure your future with a steady flow of income even after retirement.
Why Do You Need A Retirement Plan?
We tend to invest our hard-earned money in meeting our day-to-day needs so much so that we pay little attention to securing a comfortable and prosperous life for ourselves in our later years.
Most of us have demanding jobs and even demanding lifestyles. In the daily hustle-bustle of our stressful lives, do we even give a thought to life after retirement? But we owe it to ourselves to take a deep breath and think about the future too. What would be the point of working so hard if we are not able to enjoy the fruits of labour in our retired life? Apart from lifestyle, we have responsibilities towards our families that may not go away with retirement.
To ensure that your post-retirement life is smooth and peaceful and your family is still well looked after, planning for retirement now is very important. Basis your current age, income, lifestyle and life goals, you can choose an investment amount and plan for your retirement.
Do you believe in Income after Retirement?
Retirement from professional life should not mean that you stop getting a regular income. Retirement plans allow you to allocate a part of your savings and let them grow over a period of time. You can then opt to get regular pay-outs after you retire.
Fewer Responsibilities
Even though your income may not be a lot when you’re younger, you also have fewer responsibilities such as a house loan, a child’s education etc., and these responsibilities just keep on growing with age. Hence, saving for retirement becomes easier early in your professional life.
Power of Compounding
The biggest advantage of kick-starting your retirement planning is the power of compounding, which provides the foundation for time value for money. Even if you invest a small amount for several years consistently, it will grow into a large corpus for your retirement.
Saving Little Early Than Saving a Lot Later
Between saving small amounts early in life or saving big chunks of your income close to your retirement age, which one would you prefer? Saving a little early does seem like the easier and more sensible option, doesn’t it? With big expenses and a lifestyle to maintain, it would be harder to save large amounts of money when you’re middle-aged or close to retirement.
Tax Benefits³
Most retirement plans give you a tax benefit on both the investment amount and the maturity amount. You may invest in pension plans, guaranteed returns plans or market-linked plans, all of these have different provisions for tax benefits.
Long Retired Life
On average, a working Indian professional would retire around 60 years of age. Given that you lead a healthy life and considering the increased life expectancy, your retired life could span up to 40 years! How do you possibly imagine saving for a long tenure of 40 years in just a couple of years before your retirement? Starting in your twenties is the only practical solution to save for a long retired life.
Fewer Responsibilities
Even though your income may not be a lot when you’re younger, you also have fewer responsibilities such as a house loan, a child’s education etc., and these responsibilities just keep on growing with age. Hence, saving for retirement becomes easier early in your professional life.
Power of Compounding
The biggest advantage of kick-starting your retirement planning is the power of compounding, which provides the foundation for time value for money. Even if you invest a small amount for several years consistently, it will grow into a large corpus for your retirement.
Saving Little Early Than Saving a Lot Later
Between saving small amounts early in life or saving big chunks of your income close to your retirement age, which one would you prefer? Saving a little early does seem like the easier and more sensible option, doesn’t it? With big expenses and a lifestyle to maintain, it would be harder to save large amounts of money when you’re middle-aged or close to retirement.
Tax Benefits³
Most retirement plans give you a tax benefit on both the investment amount and the maturity amount. You may invest in pension plans, guaranteed returns plans or market-linked plans, all of these have different provisions for tax benefits.
Long Retired Life
On average, a working Indian professional would retire around 60 years of age. Given that you lead a healthy life and considering the increased life expectancy, your retired life could span up to 40 years! How do you possibly imagine saving for a long tenure of 40 years in just a couple of years before your retirement? Starting in your twenties is the only practical solution to save for a long retired life.
How to calculate the return of a pension or retirement plan?
You should plan for your retirement, and accordingly, generate a retirement corpus. However, the plan you select must offer adequate returns for this purpose. To calculate the return of your pension scheme, you can use an online pension calculator that will only need basic information like your savings, current financial liabilities, monthly expenses, etc.
How to use a retirement planning calculator?
Retirement planning is important for a secured life. You can use the below steps to precisely know the amount you will need for a happy retired life.
- Step 1: Visit the retirement planning calculator online.
- Step 2: Fill in the details such as your current age, when you want to retire, expected returns, monthly savings, monthly expenses and rate of inflation.
- Step 3: Click on ‘Calculate’.
After entering all the details, you will get the sum you need to live a comfortable retired life. Or, you can use the calculator given below:
How much do I need to save for retirement?
The amount you need to save for retirement depends on your financial needs during retirement and the amount you need to maintain your standard of living as well as take of your medical needs and any other expenses that might occur during retirement. You can use our retirement calculator online, or the quick calculator provided on this page to know the exact amount you will need to save for a happy retirement.
Who should invest in retirement and pension plans?
Retirement and pension plans are ideal for the following people:
- People who wish to maintain their current standard of living even during retirement.
- People who want to build a corpus to cover their potentially high medical costs in the future.
- People who want their spouse or other family members to stay financially independent in their absence.
Retirement planning goals
A critical part of retirement planning is to begin early in life. A failproof retirement plan allows you to start saving way before retirement. The amount one needs for a secure retirement depends on person-to-person. However, experts specify certain parameters that will help you save for retirement adequately.Here is an example that can help you understand how much one needs to save for retirement:
Mr Rajesh Nayyar is 30 years old and is married. Mr Rajesh works in a multinational private firm as a senior manager and earns ₹80,000. His wife is dependent on him for financial support. Mr Rajesh wishes to retire at the age of 60.
His monthly expenses total ₹35,000, including the insurance premium and other investments. He also has an emergency corpus for urgent needs and is financially stable.
By the time Mr Rajesh is 60 years, his monthly expenses will be ₹2.66 lakhs, assuming a 7% inflation rate. To meet these future expenses and maintain a secure life after retirement, Mr Rajesh will need a monthly saving of ₹27,000 in the present.
Five tips for retirement planning
Retirement is the golden period of your life. You can live the life of your dreams, but only if you plan during the working years of your life. To ensure you create a failproof retirement plan, follow these five tips:
- Start saving for retirement now: During retirement, you will not have a reliable source of income. However, to ensure your retirement is financially safe, you should start investing in a feasible retirement plan as early in life as possible. When you invest at a young age, you benefit from the power of compounding for a longer period. This helps you accumulate a large sum to fulfil future needs.
- Accommodate your retirement needs: When planning for retirement, have a futuristic approach. Think of your retirement needs and financial assistance required in the future and plan likewise. For example, your medical expenses will rise with time. So, it is good to invest in a secure health insurance plan well in time. Moreover, pay close attention to which city you will live in post-retirement, retirement lifestyle and plans, etc.
- Be prepared for financial emergencies: Most people only have one source of income. However, in case of financial or medical emergencies, it is beneficial to have a retirement corpus to fall back, especially during retirement. The sum should be enough to sustain your future financial emergencies.
- Explore your options and make an informed decision: When it comes to choosing your retirement plan, always make an informed decision after conducting a comprehensive analysis of all the available plans. It is also good to have a secure insurance plan in place in case you have dependents. So, it is best if you choose a plan that offers insurance cover and investment support. Moreover, buy an insurance plan at a young age because it comes at much lower premiums and offers relatively higher coverage as compared to a plan bought later in life.
- Diversify your investments: Diversification is important to create a failproof retirement plan. You can choose to invest some of your funds in secure investments like insurance while directing the rest of your savings in market-linked securities such as equities, bonds, etc. The market-based investment can be made as per your risk preference and retirement goal. An optimally diversified retirement portfolio minimises risk and potentially maximises returns.
Eligibility for retirement plans or pension plans in India
Each pension plan has a different eligibility criterion depending on:
- Minimum and maximum entry age: All pension plans have a minimum and maximum entry age. Usually, the minimum age of entry is 30, and the maximum entry age is 75.
- Minimum and maximum vesting age: Generally, the minimum vesting age is for pension plans is 45 years, and the maximum age is 80 years. However, the limit varies from company to company.
- Policy tenure: Each pension plan has a defined tenure, which is usually between 10 years and 30 years.
- Annual premium amount: All pension plans have a minimum annual premium limit. However, there is no maximum premium restriction.
- Premium payment term: Generally, pension plans require you to pay the premium for the same period as that of the chosen policy term. Some plans also allow for lump-sum premium payment.
Why ULIPs Make Good Retirement Plans?
How do I buy a pension plan?
Start now
The right time to begin pension planning is as soon as you start earning. With the right investment plan, you can get a high rate of return because of a longer accumulation period.
Diversify your portfolio
You should choose a retirement plan as per your risk tolerance. If you are a risk-averse investor, you can opt for market-linked plans. However, for retirement planning, you should diversify your portfolio to include traditional and safer investments, along with ULIPs, equity funds, and other securities, to minimise risk yet maximise returns.
Match your requirements
While the ideal age of retirement is 60 years, you can choose to retire as per your preference even earlier or later. However, for this, select a plan that best matches your needs in terms of risk appetite, tenure, vesting age, returns, etc.
Compare Plans and Expenses before Buying
Don’t just compare plans in terms of returns, also factor in the expenses and charges that come with retirement plans. Pick a plan that is economical and viable on all fronts.
Supplement the Traditional Schemes
Traditional Retirement Schemes like PPF or EPF may be reliable and time-tested, but you can always think of supplementing your retirement plans such as ULIPs.
Documents required to buy a pension plan/retirement plan in India
Here are the most important documents required to buy a pension plan in India:
- Proof of age including Birth Certificate/Passport/Driving Licence/Voter ID/High School Certificate
- Identity proof including Aadhaar Card/Passport/Driving Licence/Voter ID/PAN card
- Address proof including Aadhaar Card/Passport/Driving Licence/Ration Card/Electricity Bill/Telephone Bill
- Income proof including Bank Statements/Salary Slip/Income Tax Returns (ITR)
- Medical reports, in some cases
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0 - Provided the premium paying term is more than or equal to 10 years.
1 - This is applicable only if all due premiums are paid and the policy is inforce.
3 - As per provisions of Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.
The Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender/withdraw the monies invested in Linked Insurance Products completely or partially till the end of the fifth year.