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6 Tips for Buying the Best Retirement & Pension Plans If You Are Retiring In The Next 5 Years

dateKnowledge Centre Team dateJune 14, 2021 views152 Views
Tips for Buying the Best Retirement and Pension Plan

The most difficult financial challenge anyone can face is planning for a secure retirement. Unfortunately, many working people are unprepared for this task. Since retirement and pension plans are only intended to replace a portion of wages after retirement, those less than 5 years away from retiring must devise a strategy for safely crossing the finish line. Ensure that you buy the best retirement plan as per your financial needs and current affordability.

1. Evaluate your financial situation and needs

You can be financially unprepared for retirement and still not realize it. Looking at your current financial situation is necessary to develop a roadmap that will realistically fix any shortfalls. The roadmap or budget you create can be monthly, bi-monthly, or quarterly. But it should be realistic and for a short amount of months.

People who haven't saved any money should evaluate their situation and decide what sacrifices they can make. Expenditure on luxury items, gym memberships you never use, membership to the club are all costs that can be avoided once you plan for retirement.

It is important to note that a person can benefit by simply taking a few crucial steps in the present, as these little steps will make a huge difference in the long run.

Every individual should begin by calculating the amount of money they have in savings accounts. Specific investment savings and corporate retirement funds and pension schemes are included. People should have taxable accounts if they want to use them only for retirement.

But even with the availability of those accounts, an individual should make sure that those accounts don't have funds set aside for unnecessary expenditures.

2. List down all the different sources of income

The majority of monthly income in retirement should come from existing retirement accounts, although it may not be the only source. Additional income can come from various sources other than investments. There are various options and sources in today's times that help a person diversify their source of revenue and income.

Suppose you're lucky enough to be compensated by a pension scheme. If a person has that scheme, they can factor in the monthly benefit from that asset. When retired, people can still add up earnings from a part-time career.

3. Make some retirement goals according to your lifestyle

This continues to be an important consideration when it comes to pension plans. A retiree who wishes to downsize to a smaller home and live a comfortable, simple lifestyle would have very different financial requirements than someone who wants to travel a lot after retirement.

Estimate daily costs after retirement, healthcare, eating out, and recreational events. You can create a monthly budget. Health and treatment costs, such as life premiums, long-term care insurance, prescription medications, and doctor's appointments, will add up quickly later in life, including them in the retirement planning.

5 Retirement Planning Concept Everyone Should Know

4. Deal with shortfalls

All of the figures you've gathered so far can help you address the most important question of all; Do your retirement savings surpass the sum you'll need to fund your retirement completely? If you answered yes, it's important to continue funding your savings plans to keep up the momentum and stay on track. If the answer is no, you'll need to work out how to bridge that gap.

Check if your retirement corpus will be enough.

With just 5 years remaining for retirement, those running late must find ways to increase their savings. To make significant improvements, you'll probably need to combine increasing your savings rate with cutting back on needless expenses.

It's important to determine how much more you need to save to close the gap and make the necessary adjustments.

5. Calculate the risk tolerance

At different ages, risk tolerance varies. Portfolio ratios can increasingly become more cautious as jobs reach retirement age to protect accrued savings.

A bear market could derail your plans to quit your job only a few years before retirement. To deliver both prudent growth and dividends, retirement portfolios should predominantly consist of high-quality, dividend-paying stocks and investment-grade bonds.

6. Consult a financial advisor for the best pension plans

Money management is a skill that only a few people have mastered. Consulting a financial advisor or accountant might be a smart course of action.

Best Retirement and Pension Plans by Canara HSBC Oriental Bank of Commerce Life Insurance

We have experts that advise customers every step of the way. We have a wide range of retirement and pension plans that the customers can choose from as they are nearing retirement or when they start their career. The earlier you start, the better it is.

1. Guaranteed Income4Life

Customers can choose from three different choices in the Guaranteed Income4Life Plan, based on their needs. The three options are Guaranteed Income, Guaranteed Long-term Income, and Guaranteed Life-long Income.

Income4Life

All three options provide consumers with a fixed monthly income for up to ten years and premium security and options to cover the partner.

2. Pension4Life

You can choose from a range of annuity options for this scheme. You have the choice of obtaining an immediate or deferred annuity. This bundle has a guaranteed lifetime income that is paid into your bank account. There's also the option of collecting annual checks for the remainder of your or your wife's lives.

3. Guaranteed Savings Plan

The Guaranteed Savings Plan is not a pension plan but it can surely help you secure your family's future. It promises life insurance for the whole lifespan by offering premiums for a limited period. In the event of your death, your family would have much more protection.

Know more about Guaranteed Savings Plan.

These are some of the best retirement planning tips if you are retiring in the next 5 years. If you have no money set aside for retirement, consider this a wake-up call to get serious about improving your situation. So get to work; it's easier to tighten your belt now than to do so when you're eighty.

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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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