Struggling to meet your needs in today’s time? Do you think that your current level of income is not sufficient or is just enough to take care of your family’s present needs, then saving will be a trouble for you?
If you do not have plenty of savings for the future, start from today because inflation is most likely to eat up your savings whatever you have. Ultimately, you might fall short of the funds that you have saved all your life. If you do not want to end up wasting your hard-earned money, the best is you make wise investments that give you high returns.
Well, if in the present you feel money is scarce, saving for your life after retirement becomes a must. And the best way to do it is by buying a retirement policy. Let us further read about the retirement plan.
What is a Retirement Plan?
A retirement plan is also called a pension plan. The life insurance policy comes with a double benefit of saving the money over years to save money for life after retirement. Apart from this, the insurance policy pays the nominee a death benefit if the life insured passes away during the policy term.
The insurance policy benefits you in fulfilling post-retirement needs like medical emergencies, household expenses, and other living costs. Investing money in the pension plan gives you a stable income after retirement.
Well, you can read more about this life insurance policy before buying it. And here are the few mistakes that you should avoid when buying a retirement plan.
Mistakes to Avoid Before Buying a Retirement Plan.
These are the mistakes that you should not make when buying a retirement insurance policy:
- Planning without establishing a solid retirement plan: When buying a retirement plan, the first thing you must evaluate is how much you would need in old age. Consider your current living expenses and then plan accordingly. You must have a proper plan in mind before buying the plan. Without having credible thoughts and numbers, you will not end up saving wisely at the time of your retirement.
- Do consider inflation: You cannot ignore the rising rate of inflation. The amount of money you have today will be less when you talk about 20 or 30 years from now. You must keep in mind the rate of inflation so that despite buying the retirement plan you should not lack on creating a savings fund for yourself and your spouse. For example, if you purchased a packet of buttermilk for Rs.8 some 5 years ago, the price for the same packet has risen to Rs.15 per packet. Keeping the same fact in line, understand that if you need Rs.10 lakhs to survive in today’s time, after 10 years you would need approximately Rs.16 lakhs to live comfortably. The rate of inflation assumed as 6%.
- Medical Expenses: Keep in mind that with old age, at times medical expenses are uncalled for. They occur and you have to shed money from your savings when obviously the active income has stopped. Think about the urgent and unexpected cost of medical expenses when the medical inflation rate is close to 15%. Buy a pension plan that not only protects your savings but also saves your family from the financial stress to suddenly arrange for funds.
- Do not ignore the tax benefits: Life insurance policy is often purchased with the aspect of tax benefits. You can buy a pension plan and get the tax deduction under Section 80C of Income Tax Act, 1961. Make sure while you buy the retirement plan, you have a plan that gives you considerable tax benefits.
- Do not take early withdrawals from the pension plan: If you take early withdrawals from the pension plan, you end up reducing your savings. Also, if you withdraw early, you also incur tax liabilities. So, you have a reduced fund when you actually require it after retirement.
- Thinking it is too early: Thinking that buying a retirement plan when you are in your 30’s is too early is the biggest mistake you make. Start with the pension plan as early as possible as you end up saving more. Also, in the beginning the premium is also less.
- Do not carry your debts to life after retirement: You should not carry your debts for life after retirement. If you do that, you will probably have to give away your savings to clear the debts.
Apart from avoiding these mistakes, you should also bear in mind these factors before choosing a retirement plan.
Things to consider before buying a retirement plan.
These are the factors you must consider before buying a retirement plan:
- Appropriate Retirement Pension – Always hunt for a proper retirement pension for you and your family.
- Inflation Rate – Note that the inflation rate should be lower than the return on investment (ROI).
- Guaranteed Return – Try to keep the risk factor low and look for options that give you a guaranteed return.
- Vesting Period – Select the retirement savings plan with the vesting period that best suits your needs and requirements.
- Expenses – Look for alternatives with exceptionally low expenditures or charges. Always make sure to analyse all of the available savings options before making a decision.
- Ask your financial advisor – If you need it, hire a financial adviser to help you plan your retirement. Your financial advisor will assist you at every step of the way, guiding you through the process of selecting the optimal saving plan and putting it into action.
Best retirement plans
There are many retirement plans available but look for those that satisfy your needs. Some of the best retirement plans are:
ABSLI Guaranteed Annuity Plus
- The pension plan provides guaranteed income after retirement which assures life security.
- The insurance plan leaves your spouse/dependents with financial security.
- The income from the plan enables you to maintain your current living standard.
- The pension plan comes with multiple annuity options.
- The ABSLI Guaranteed Annuity Plus plan also provides a deferred annuity option to build a regular income stream with deferment period up to 15 years.
- The life insured can also choose to increase the annuity through the top-up options.
- You can read about the ABSLI Guaranteed Annuity Plus here.
A retirement plan is a safe way to build financial security for life after retirement. It is important, especially for those who have a restricted income source and are in jobs. Buying a pension plan gives a sense of security when the active income stops but the living expenses does not. If you are looking to prepare yourself financially to buy a retirement plan, you must buy it now. For more details about the retirement plan, you must read here.