Given the ever-increasing rate of inflation, investing in these plans has become critical. Even if you have a large amount of investing cash in your bank account, you may still require one. Because investment funds are frequently used to meet unexpected needs, this is the case. In this way, the finest pension plan will support you after all other sources of income cease to exist.
What is a Pension/Retirement Plan?
A pension plan, also known as a retirement plan, is a sort of investment plan that allows you to accumulate a portion of your resources over time in order to ensure a stable financial future. A pension plan can help you deal with the uncertainties of retirement and assure a regular stream of income. Even if a person has a sizable savings account, a pension plan is essential.
Importance of a Pension Plan
- Increased retirement years: As India’s average life expectancy rises, it’s becoming more vital to plan ahead for a longer retirement. The numbers for life expectancy show how long the average person lives. In India, the average life expectancy of a person is 78 years. As a result, you must begin planning ahead of time in order to maintain your lifestyle and cover other expenses for such a long period of time.
- Health-care costs: Unexpected medical costs are a frequent concern as people get older. If you don’t prepare ahead, rising medical bills can be tough to handle.
- Financial independence after retirement: After retirement, you want to be able to live your life on your own terms. However, more than 65 percent of people over 60 rely on others to cover their everyday expenses. This demonstrates the importance of preparing for retirement and ensuring financial independence.
Benefits of a Pension Plan
- Retirement plans can provide you and your spouse with a guaranteed regular income for the rest of your lives
- In some retirement plans, your children will get a lump-sum payment if you and your spouse both pass away. This will assist you in leaving a legacy for your children
- In addition to a pleasant retirement, you can get tax advantages on the premiums you pay up to a limit of 1.5 lakh
- Most pension plans provide insurance coverage that safeguards you and your family from financial hardship.
- Pension plans offer you complete security against all types of investment hazards.
- You can supplement your pension plan by including riders such as ‘disability due to an accident’ or ‘severe illness.’
Types of Pension Plans
- Deferred Annuity
- Immediate Annuity
- Annuity Certain
- With and without cover pension plans
- Life Annuity
- National Pension Scheme
- Pension Funds
There are many more different types of Pension Plans available in India offered by different providers depending on your requirements.
Factors to Think About When Purchasing Pension Plans
- Monthly Expenses: Once you retire and no longer have a steady source of income, your pension must meet all of your monthly expenses.
- Inflation: You must account for inflation because the cost of numerous everyday items will inevitably grow in the future.
- Life Expectancy: Your pension should ensure that you have enough money to last the rest of your retirement years.
- Medical Expenses: Money may be required for health examinations and any unanticipated medical treatments.
- Outstanding Loans: Any outstanding loans should be evaluated because they can eat into your retirement savings.