You need all the control over your life you can get, once you hang your hat from work. Ideal retirement is that one event in life that lets you be yourself after you decide not to work. To have such a retirement, your investments play the most significant role. Smart investors consider buying the best retirement plans to fund their retirement dreams. Some other investors also consider putting their money in a mix of assets to enjoy significant returns. While some other consider playing it safe by parking their money in government schemes. So, where can you invest your money for a great and comfortable retired life?
Here are five investments you should have in your retirement investment portfolio:
- Guaranteed Investment Plans
- Pension Plans
- Fixed Deposits
- National/New Pension Scheme
- Unit Linked Insurance Plans (ULIPs)
1. Guaranteed Investment Plans
Guaranteed investment plans are some of the safest long-term investment plans in the country. If you want to preserve your financial wealth for a long time against both inflation and taxes these are the plans you should look for.
Here are two guaranteed investment plans from Canara HSBC Oriental Bank of Commerce Life Insurance for you:
A. Guaranteed Savings Plan
A Guaranteed Savings Plan is a safer alternative for growing your money for a comfortable retirement. As the name suggests the maturity proceeds from this plan is guaranteed. Thus, this is a perfect plan if you need to offer a secure retirement to your spouse in case anything happens to you.
While the plan allows for a tax-free maturity value, it also allows for better growth for a long-term investor. The following bonus additions reward you for staying invested over a long period:
- Guaranteed Yearly Addition
- Guaranteed Loyalty Addition
This plan plays an important role in ensuring financial input at retirement. Just in case your other efforts do not bear expected fruits.
B. Guaranteed Income4Life
Guaranteed Income4Life is an investment plan which can secure an income for you until the age of 99. Since you may want to start this income at the age of 60 or a little later, you can start this plan at the age of 45.
This plan allows you to invest for a few years and then start receiving regular income out of it. This income can continue till the age of 99. If you hold this investment jointly with your spouse, the pension continues until the surviving spouse reaches the age of 99 or natural demise.
Guaranteed Income4Life automatically secures an income for you while you decide where and how much to invest the money from other plans.
2. Pension Plans
Pension plans help you convert your wealth into regular and reliable stream of income. Thus, they are an inseparable part of your retirement plan. Apart from the Guaranteed Income4Life plan, Canara HSBC Oriental Bank of Commerce Life Insurance also offers the following pension plan for your post-retirement income needs:
This is an investment plan where you can invest the lump sum money received from other long-term investment plans to create pension income. You can invest in the following options depending on when you want your income to start:
- Immediate Annuity: Income starts at the end of the income period. For example, if you chose monthly income mode, your income would start at the end of the first month after investment.
- Deferred Annuity: You can defer the income for a few years. For example, you can invest the lump-sum money at the age of 55 and want the income to start at 60. Thus, the first payment will arrive after 5 years and one month in the case of monthly mode.
Know more about Pension4life.
3. Fixed Deposits
Fixed deposits are one of the most popular and perhaps one of the easiest to use investment options. Especially if you have little time to look at where your money is going. Fixed deposits offer the following features, benefits, and limitations to your money:
- A. Fixed Rate of Return: Once you deposit the money the rate of interest or growth rate of your money is set and will remain unchanged for the entire deposit period.
- B. Defined Tenure: The deposit’s tenure is defined clearly. So, you can plan your FDs in ways to either enjoy a long-term growth or regular income.
- C. High Safety: Fixed deposits of scheduled national banks and Post Office are insured up to Rs. 5 lakhs.
- D. Good Liquidity: You can break the FDs any time in case you need money in emergencies. However, you end up losing a part of the interest.
- E. Online Start-Stop Renew: If you operate your savings account online opening, closing, and renewing fixed deposits will be a matter of just a few clicks.
- F. Taxation: Fixed deposit interest is taxable in the year it accrues and is added to your taxable income.
4. National Pension Scheme
National Pension Scheme or NPS is a perfect retirement investment solution that you must have in your retirement portfolio. The major advantage that NPS has over other investments is that you can keep increasing your regular savings in NPS along with your income growth.
Thus, your retirement savings keep up with your income growth without having to buy a new plan now and then. However, the maturity value of NPS is not entirely tax-exempt, unless you follow the withdrawal rules:
- 40% must be invested for pension in an annuity plan
- 60% of the maturity proceeds you can withdraw tax-free
- You can also continue the NPS account up to the age of 70
5. Unit Linked Insurance Plans (ULIPs)
Unit Linked Insurance Plans are a versatile investment option from the life insurer’s portfolio. This is one investment plan which offers a complete portfolio management platform for your investment. You can invest in multiple funds with different risk-return profiles and manage your portfolio like a professional.
Here is the online ULIP plan from Canara HSBC Oriental Bank of Commerce Life Insurance:
Invest 4G is an online Unit-Linked Insurance Plan from Canara HSBC Oriental Bank of Commerce Life Insurance. As a ULIP, it offers two major benefits for retirement savings:
- Multi-asset (portfolio) investment option
- Tax-free withdrawals after five years
How to Make the Most of Invest 4G?
The two benefits ULIP investment offers towards retirement goal are important for you to build an adequate retirement corpus in a hassle-free environment. Here’s how:
A. Multi-Asset or Portfolio Investment
As a young investor when you start investing for a long-term goal such as retirement, you want to invest aggressively to maximise growth. However, as time passes you need to reduce your investment risks so that you can preserve the growth.
A ULIP is perfect for a dynamic risk investment for the following reasons:
- Invest in a mix of equity and debt funds or invest in a balanced fund
- Switch between equity and debt or balanced fund to debt fund anytime, without having to pay capital gain tax
- Invest additional money if your annual premium is less than 10% of the sum assured or after your premium payment term in the policy
Benefits of using Invest 4G plan for retirement savings:
Automate portfolio management
- Maintain risk-return profile:You can fix a debt-equity ratio at the beginning of your investment period and the plan will rebalance your funds regularly.
For example, you want to maintain a 50:50 ratio of equity and debt in your retirement portfolio. The fund will withdraw from equity funds and deposit to debt funds when the markets are performing better and reverse the flow when the markets are running lower. The transfer will continue until the plan achieves a.50:50 ratio between equity and debt.
Thus, you can take advantage of market movements even when you are not paying attention.
- Lower the risk with time: You can also choose a strategy where the growth of the equity portfolio is moved to the debt funds for preservation.
For example, you want to safeguard your returns from the equity funds and decide that any growth above 5% of the folio must be preserved. Thus, every time the value of equity funds grows beyond 5% the plan will move the additional money to the debt fund.
- Preserve your capital: Imagine investing for 20 or 30 years. Your portfolio growth will be huge, provided you have been consistent with your investments. If you have used an equity fund to build this corpus, you need to make sure that equity market volatility does not affect the value in the final few years of the plan.
Thus, you can use the strategy to systematically transfer your entire equity corpus to debt and liquid funds in the final four years of the plan.
Bonus Additions – Growth Boosters
Invest 4G offers two bonus additions for long-term investors:
- Loyalty Additions: Additional units added to your portfolio for investing over a long period. More additions for a longer period.
- Wealth Boosters: Additional units for staying invested for more than 10 years.
B. Tax-Free Withdrawals
ULIP plans carry a mandatory lock-in period of five years. But, after five years any withdrawals from the plan are completely tax-free. If you have bought a ULIP plan after 1st Feb 2021, complete tax exemption will only apply to the withdrawals if your total annual investments in the plan have been Rs. 2.5 lakhs or less.
The tax-free withdrawals are very convenient when you are close to retirement or after retirement.
You can ensure a financially independent life post-retirement by investing appropriately in a couple of these plans. Also, these investments would offer tax relief which means additional savings. Remember that every investment plan will allow you specific benefits. So, invest as per your needs.