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5 Essential Investment Options for a Comfortable Retirement

dateKnowledge Centre Team dateMay 24, 2021 views237 Views
Investment Options for a Comfortable Retirement | Retirement Planning

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:

Pension 4life

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

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
Investment Options for a Comfortable Retirement | Retirement Planning

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.

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Frequently Asked Questions (FAQs) for Retirement and Pension Plans

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the Premium calculator available in the ‘Tools and Calculator’ section of www.canarahsbclife.com.

The Invest 4G plan offers three benefit options to choose from. If you have opted for the Life Option or Whole Life Option, the insurer will pay the nominee(s) death benefit if the policyholder meets with an unfortunate incident. However, in the Life Option with Premium Funding, the policy continues even after the death of the policyholder. The company pays the remaining premiums until the policy matures.

Life is unpredictable and so it is important to prepare for all eventualities. If you regularly save a substantial amount of your income for retirement, the corpus may expand to a comfortable level before retirement. In case you become disabled and are unable to contribute to the retirement plans, most plans will continue to multiply your savings. The amount already accumulated will continue to grow and besides the existing plans you can also choose to invest in pension schemes specifically designed for people with disability.

Investment in ULIPs like Invest 4G plan qualifies for tax deductions under section 80C of the income tax law. The maturity benefits of ULIPs are also tax-exempt under section 10 (10D) of the Income Tax Act, 1961. However, if the premium paid during the policy term is more than 10% of the sum assured, the maturity proceeds will be taxable.

The concept of early retirement is catching up fast in India, but there are no specified ages for early retirement. While in some western countries the age between 35 and 45 is considered favourable for early retirement, in India the ideal age is 45-50 years. With the right planning and investments, it is not very difficult to retire early.

At the age of 35-40, people generally have several responsibilities such as children’s education and various EMIs. It is difficult to spare a substantial amount of income for retirement. Depending upon the needs of the household and the lifestyle, one should aim to save around 40-50% of his/her income. Around 10% of the income should exclusively be allocated for retirement planning. Here are some tips to choose the best retirement plan.

  • Focus on your needs: It is easier to formulate a strategy when the goal is clear. Make an estimate of the amount required to sustain your life. Take inflation into account and zero in on the targeted corpus.
  • Research thoroughly: Conduct thorough research before investing in any financial product. Read the term and conditions properly and try to understand how an investment product fits your needs.
  • Consider different products: The market is awash with all kinds of investment products. Do not follow conventional advice as the need of every person is different. Take into consideration all the suitable products, conduct an objective analysis and then invest.

Owning a house is a cherished dream for many. There are several ways to save for a new house, but in urgent cases, people may be tempted to withdraw from their retirement fund. There are various financial products for retirement planning, and all have different withdrawal rules. In the case of the National Pension Scheme, partial withdrawals for special purposes like buying a house are allowed only thrice during the policy tenure. However, to avail the withdrawal facility, you should be an NPS investor for at least 10 years and you are permitted to withdraw only 25% of your contribution. If you have a PPF account, you can withdraw 50% of the accumulated amount, but only after staying invested for at least 6 years. The Invest 4G plan also allows partial withdrawals after five years of investment.

The quantum of monthly savings depends on the specific needs of the buyer. Financial advisors, however, suggest people save around 15% of the monthly income for retirement.

Retirement plans such as NPS have a very low entry threshold. It is also open to all and anyone can open an NPS account and start saving. A small business can also invest in Invest 4G plan from Canara HSBC Oriental Bank of Commerce for as low as Rs 5000 every month.

The choice between paying off a student loan or start a retirement account is not a difficult one. Starting early for retirement planning has its own advantages but extending the student loan will increase the interest burden. You will have to find a balance between the two. Try to pay off the student loan as soon as possible, but do not hold back on investing in a retirement account.

Most people nominate their spouse to receive retirement benefits in their absence. But a spouse is not automatically entitled to be the beneficiary of a retirement account owned by the other spouse.

Gold is a safe investment asset and investors often flock to the yellow metal to stabilise their portfolios. Holding a small quantity of gold can be considered as the intrinsic value of gold remains intact. You can also choose to have an exposure to gold through ULIPs. ULIP funds invest in a variety of asset classes and some fund options also have a small exposure to gold. You can choose fund options with gold to have a small and indirect investment in gold.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

The government has allowed all central government pensioners to open a joint account with their spouses.

Vesting date or age signifies when your pension plan’s accumulation phase is over and the distribution phase can begin. For example, in a deferred annuity plan, you may have a vesting date which is 10 to 30 years away depending on your age at entry. You will continue to invest or stay invested till the vesting date. After the vesting date or age, you can start receiving the pension or withdraw the money from the plan.

The steps may differ from plan to plan. However, you can buy the online retirement plans following the steps below:

  • Retirement Calculator: Use a retirement calculator to estimate your corpus need and expected monthly investment amount to achieve it
  • Choose Plan: Select the online retirement plan you want to start investing in
  • Contact Information: Fill in the personal details including the contact information. Make sure to put the correct e-mail ID which you can access since all future communication about the policy will take place via e-mail.
  • Define Your Investment: Select the goal, investment term, investment frequency and amount you want to invest (based on the calculator estimate)
  • Select Fund Allocation: Online retirement plans give you the option to invest in multiple assets including equity funds. You can select the ratio in which your premium will be allocated to these funds as per your risk appetite. Then select one of the portfolio rebalancing strategies.
  • Select Withdrawal Plan: You can withdraw money based on set milestone or systematically from the plan after the lock-in period. Select the options for withdrawal as per your plan.
  • Review Plan & Investment Details & Complete the Application Form

You can pay the premium amount before or after completing the application form to start investing.

The best time to plan your retirement is when you are planning your career. However, this may not be the time when you really start investing money for your retirement. You must start investing in your retirement plan as soon as you start earning.

Retirement is the only financial goal you cannot repair with other means of funding like a loan. Thus, developing the habit of investing with every income you have is the best way to have a comfortable retired life.

Insurance allows your family, especially your dependent spouse to continue living without financial worries if anything happens to you. Also, insurance may help you save enough for retirement in case of permanent disabilities. Additionally, life insurance retirement plans allow you to build a good retirement corpus with bonus additions.

Yes, you can change the nominee of the policy anytime you need. If you are using an Electronic Insurance Account (EIA) to manage your policies, you can change the nominees anytime from this account. Otherwise, you can contact the customer care to update the nominations on your policy.

You can opt for auto-debit of the premiums from your savings account. You can also pay the premiums online using your debit card, credit card or a payment wallet.

You can get Rs. 1 Core pension plan using the online retirement calculator. The calculator will assess your eligibility and provide you with the probable monthly or annual investment to achieve the goal. If the amount seems feasible you can complete the purchase online or set an appointment for a qualified advisor to help you in the process.

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