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5 Questions to Ask Before Buying a Retirement Plan

dateKnowledge Centre Team dateMay 05, 2021 views221 Views
Questions to Ask before Buying a Retirement Plan | Retirement Planning Plan

Retirement is a phase when you want to taper down your professional commitments and spend more time with your near and dear ones. Retirement is not just a number anymore because people work even beyond the age defined by their employers. Moreover, this age varies across organizations and industries.

But whenever you decide to pull down the curtains on professional life, the first thought to cross your mind is about running your household. This is where a well-thought-out retirement plan and investments can help you live and enjoy your second innings.

Only YOU can answer this question based on your current lifestyle, cost of living, aspirations, etc. Some of your expenses such as child’s fees etc may not exist when you retire. However, routine health-related expenses may increase. Also, inflation will increase the cost of living in the future. Another important factor is your current ability to set aside the required amount to invest to meet your financial goals.

You must introspect on these five important questions while selecting a retirement plan for yourself. You are making a long-term decision and this decision should enable you to lead an equally comfortable life post your retirement.

Questions to Ask While Buying the Best Retirement Plan

There are a lot of financial products that offer a regular or monthly income to the policyholders while some of the policies pay a lump sum amount at maturity. Not all the retirement and pension plans will offer you similar benefits. Hence, it becomes important for you to ask these questions to assess the suitability of the retirement plan you are about to choose for yourself.

1. Does the plan meet your needs?

Your retirement needs consist of two financial goals:

A. Build an adequate retirement corpus before retiring

B. A reliable regular income for a lifetime after retirement

If you are in your late 20s or early 30s your priority should be to build a large corpus by the time you retire. So, the investment plan you choose to meet this goal should help you invest aggressively. While you are investing aggressively, you need other supports from your retirement plan:

  • Option to invest systematically in an equity fund
  • Automated investment allocation management
  • Systematic switch option from risky equity funds to safer debt funds in the final few years of investment

These features will allow you to benefit from the aggressive investments in your early years and build a solid corpus by the time you retire.

Questions to Ask before Buying a Retirement Plan | Retirement Planning

However, if you are in your 50s, this is the time when you start thinking of the next phase of your life. Your investment needs or retirement plan need will change to pension plan need. Now is the time you start converting your investments from the first phase to generate a regular income after you retire.

You will need the following qualities in this retirement pension plan:

  • Safe investment
  • Guaranteed income (possibly until your natural demise)
  • Life cover to help surviving spouse continue the pension and meet transition costs

Life Insurance Equation

Life insurance retirement plans give a dual benefit of providing life cover as well as a predictable stream of income post-retirement. These pension plans are some of the safest long-term investment plans in the country and give you the following two options:

A. Immediate annuity: Where your pension starts immediately after you invest your money

B. Deferred Annuity: You can invest now and start your regular income a few years later

Pension4Life Plan by Canara HSBC Life Insurance offers both annuity options. The difference is for the immediate annuity option you need to invest a large sum of money immediately. With the other annuity plan, you can take a few years to invest the corpus, which will turn into regular income after the vesting period.

2. Does the plan offer tax benefits?

Will your investment help you save taxes as well? Retirement and pension plans from life insurers definitely offer maximum tax efficiency.

Checking this will help you plan your investment better. For example, in the case of Invest 4G plan by Canara HSBC Life Insurance, the withdrawn amount is exempted from tax under section 10(10D) of the Indian Income Tax Act.

3. Does your plan consider inflation?

The cost-of-living increases year on year. If your money does not grow faster than the rate of inflation, you will not be able to maintain the same lifestyle in the future. When you invest in any plan, you must check the past track record and the kind of funds it invests in. Or you need to plan for a larger retirement corpus.

The best thing to do to ensure that your retirement goal keeps up with your income and inflation is to invest a specific percentage of your income in this goal. However, not all long-term investment options will allow you to invest an increasing amount of money in the same plan.

4. Does the plan offer guaranteed or safe monthly income?

You can explore guaranteed return plans because robust, comprehensive insurance coverage is no longer about only a Sum Assured. Top money-saving plans look at protecting life, generating an income stream, giving away loyalty additions, and financially supporting the family till the end of the policy period. For example, Guaranteed Income for Life plan of Canara HSBC Life Insurance gives out a regular stream of income until your natural demise.

Here are 6 benefits of buying a saving plan with guaranteed income.

Such plans are very important, especially for the later years of your life when you’d like to retire from managing your finances as well.

These plans are most useful when held jointly with your spouse. If one partner passes before the other, the pension income automatically transfers to the other spouse.

5. Can you change the sum assured in a retirement plan?

Few retirement plans, including Smart Lifelong Plan from Canara HSBC Life Insurance, allow you to increase or decrease your life cover as per your needs. This helps you meet your financial goals and beat inflation.

Do take care of the tax angle (10% premium rule) while changing your life cover option. Breaking this rule can make your partial withdrawals and maturity value taxable to some extent.

If you carefully evaluate your short and long-term goals and start investing in your future, you will enjoy retirement rather than endure it. But finding the right insurance plan is important so that you stay invested and watch your money grow. This gives you peace of mind now and even then.

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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

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 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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