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7 Benefits of Early Retirement Planning in India

dateKnowledge Centre Team dateJune 15, 2021 views122 Views
Benefits of Retirement Planning | Buy the Best Saving Plan | Retirement and Pension Plan

Most people in India believe that saving money is the only way to be financially independent and stable. We think that saving money can gives us a secured financial future. However, it is a fact that urban Indians do not pay much attention to their retirement plan. However, to have a secured future and hassle-free financial life, you need to have a retirement plan in place. Most of the people in India have this misconception that retirement planning can be expensive and is limited to the rich. In such cases, financial priorities weigh down on retirement plans such as childcare, medical emergencies, and improved living standards. This makes it difficult to save any money and invest in early retirement planning.

7 Benefits of Early Retirement Planning in 2021

Here are seven benefits of early retirement planning, which may interest you to start your retirement planning as soon as possible, if you do not have a retirement plan yet:

1. Tax benefits of retirement plans

Tax benefits are one of the major advantages of having an early retirement plan. By investing your income in infeasible plans, you get to save some tax. Furthermore, retirement plans help you diversify your tax payments.

2. Safeguard your assets and have a secure future

You do not need to liquidate your assets for a better retirement income. By investing in a retirement plan, you do not need to rely on your assets. Thus, early retirement planning can help you have a secure future.

3. Better returns on your savings

By safeguarding your savings in the bank, you get minimal benefits. Investment options help you to maximize your profits by giving you better returns. Investing your money in retirement plans has a higher return than bank savings.

4. The power of compounding for retirement corpus

We have a common belief that by saving our income, we can build an adequate retirement corpus. However, that is an inefficient plan as we did not factor in the inflation rate. The power of compounding helps you have a better retirement corpus.

Learn why should you consider inflation when planning for retirement?

5. Unprecedented emergencies

A retirement corpus helps you sustain unprecedented medical emergencies. By having a retirement plan, you can fall back on funds as and when required. Remember that with age, your medical expenses are bound to grow.

6. Support your dependents

By having a concrete plan in place, you can support your dependents. Retirement plans act as a financial cushion and give your dependents financial security. You can ensure that there is no loss of income after retirement with smart financial planning.

7. Start early for maximum benefits

To reap the maximum benefit of your retirement plan, you will have to begin early. The best choice for any early retirement plan is to begin investing in your early 20s. By doing this, you extend the tenure, and you can pay lower premiums.

However, if you begin in your late 20s or early 30s, you can make up for any shortfall by bridging the gap. Fix your retirement age and needs, and start investing in a retirement plan.



For example, Akash and Shravan have always dreamt of early retirement. However, both of them followed different plans to save for retirement. Shravan believed that saving would help him build his retirement corpus. He tried saving a part of his income every month for a retirement plan. Akash began building his retirement corpus early in his 20s by investing a portion of his income in Guaranteed Income4Life plan by Canara HSBC Oriental Bank of Commerce Life Insurance. Akash would set aside a part of his income for his investments.

In the end, Akash could realize his dreams due to his smart financial planning. Shravan was only privy to a meagre amount and ended up working for a longer period.

To avoid this from happening with you, follow these 3 steps:

1. Factor in your existing financial situation

Before investing in a retirement plan, you need to assess your current financial situation. This includes an assessment of your assets and sources of income.

2. Have a tangible retirement and financial goal

Fix a retirement age and establish financial goals for yourself. This can include setting a target for your retirement. For instance, you want an early retirement at 50. You can now choose a plan that will help you retire at 50 with viable options.

3. How much of a risk appetite do you have?

Risk appetite is a major aspect of retirement planning. By assessing your risk appetite, you can devise a suitable plan for yourself. This also depends on your current financial situation and the financial goals you want to establish later.

Choose a Retirement Plan that Best Suits your Needs

Early retirement planning is necessary for a sustainable financial goal. By having a retirement plan in place, you get to accomplish all your financial goals. With Canara HSBC Oriental Bank of Commerce Life Insurance, you get to avail yourself of a flexible retirement plan and build your retirement corpus. Understanding and knowing your options helps with better retirement planning. We have a comprehensive set of plans to kick start early retirement planning. Browse through our plans to customize your goals and changes your requirements. From securing a guaranteed income post-retirement to providing a life cover – our life insurance plan provides you with a safety net.

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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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