Phone NumberTo Buy: 1800-258-5899 (9 am to 6 pm)

|

Emailcustomerservice@canarahsbclife.in

|

Locate BranchLocate Branch

How to replace your income in 20 years using savings plans?

dateKnowledge Centre Team dateJune 15, 2021 views292 Views
Retirement Planning | Buy the Best Saving Plan | Retirement and Pension Plan

What is retirement? It’s not like you can no longer bear the burden of professional work. You may even be in the best shape of your professional life. Your children are settled and perhaps earning their place in the world, you have achieved almost all financial goals of your life, except the legacy plan.

So, what is retirement really? Is it just a break from professional work?

If you look at it practically, no one stops you from continuing your profession for a few more years. But, one thing is certain, you no longer need to work for money anymore.

Thus, retirement may not be just a break from the work, but it is when you no longer depend on the income from your work. You can retire anytime once you have built a large enough corpus to take care of your post-retirement life.

In this article, we will discuss:

I. Why replace income?

II. How much money will you need?

III. How to build the corpus?

IV. Where to invest?

V. Converting your corpus into regular income

Why should you Replace your Income?

You need to replace income to take care of your expenses after retirement. The monthly budget for your household will look quite different from today because of the following changes:

You may be paying your child’s school and University fees in your 40’s and 50’s but that will cease when your child grows up. Ditto for children’s living expenses. Children grow up, start earning and living on their own. All the expenses about their lifestyle would come down to zero after a certain age.

Costs of commuting, lunch and other expenses related to the workplace would also no longer exist as you spend more time at home and very little time outside. Lifestyle expenses may also see a cut if you prefer

spending your sunset years closer home with family and friends instead of touring the world or frequently going on weekend trips.

The only major cost that could still burn a hole in your pocket is healthcare. Considering empirical evidence, inflation in the food and healthcare segments has been higher than the overall average rate of inflation. Moreover, the probability of you and your spouse needing more medical attention in old age is higher. Ergo, not only an increased wallet share but also the impact of higher inflation should be considered.

How much Money Will you Need?

The estimated cost of living for you and your spouse is usually about 20-30 % of your monthly income. The remaining money is either spent as a lifestyle cost or saved for future needs.

So, if you are earning Rs. 1 lakh now you are spending about Rs. 20 - 30,000 on yourself and your spouse. This is the amount that will translate into personal expenses post-retirement as well.

This amount adjusted for inflation (5% p.a.) could go up to Rs. 90,000 in 30 years. So, if you are 30 years of age now, this is the amount you will need to start your retirement at 60. However, if you wish to retire at 50, you may withdraw a lower amount, i.e., approx. Rs 80,000.

But you will have a longer retired period to take care of, plus you may still need to take care of a few financial goals. Thus, if you can secure an income slightly higher than Rs. 90,000, say Rs. 1 lakh after your retirement, you may have an easier life ahead.

Also, this income has to take care of inflation in the future. So, every year, you should be able to withdraw a higher amount. To achieve such a post-retirement income starting at the age of 50, you will need a corpus of about Rs 2.8 crores.

How to Build the Retirement Corpus?

If the inflation and rate of interest figures remain the same, saving about 35% of your salary should be enough to build an adequate retirement corpus for you in 20 years. Meaning, you can replace your current income within 20 years if you save 35% of your income towards this goal.

Learn why should you consider inflation while planning for retirement.

The next natural question is, ‘where to invest?’ So, here are the best retirement saving plans you can explore:

1. NPS & EPF Investments

If you are a subscriber to any of these retirement schemes, you are already contributing 10 – 12% of your income towards your retirement. With NPS you can contribute up to Rs. 50,000 more each year, free of tax. However, to invest more you will need other investment options.

As a self-employed investor, as well, you can invest in an NPS Tier-I account. The limit for self-employed investors is 20% of annual income. Thus, you will need to allocate only the remaining 15% to other investment options.

2. Invest 4G ULIP Plan

Invest 4G, offered by Canara HSBC Oriental Bank of Commerce Life Insurance, is one of the most versatile retirement investments plans you can use. Your money is invested in both debt and equity instruments based on your allocation.

Invest 4G allows you to gain from the dynamics of the financial markets using automated portfolio management strategies. When you are young, you can invest aggressively in equity-oriented funds and then gradually move your money to safer debt funds. Thus, Invest 4G ULIP plan gives you the most tax-efficient way of building your retirement corpus.

3. Guaranteed Savings Plan

Guaranteed Savings Plan

Another option for you to fill the gap in your retirement funding is through Guaranteed Savings Plan from Canara HSBC Oriental Bank of Commerce Life Insurance. As the name suggests the maturity benefits in this plan is guaranteed. So, you can estimate your plans maturity value beforehand.

Learn more about Guaranteed Savings Plan.

Converting Your Corpus to Retirement Income

You will need to use monthly income plans to convert your corpus to regular income after you retire. The following two retirement saving plans are best suited to safely provide you with a long-term income stream:

a) Guaranteed Income4Life

Wherein you invest for 10 years and defer the pay outs by another 5 years. You can also decide to receive a lump sum instead of income streams. The plan offers guaranteed regular income for lifetime to meet post retirement options under Guaranteed Life-long Income option. Under this option, you can also cover your spouse, thus, securing both of your lives. With this plan, you can prepare for early retirement as it will give you that extra income to help you take care of both long-term and short-term financial goals.

b) Pension4Life Plan

You can park your lump sum corpus in this plan and convert it to income either immediately or after few years. Choose from a variety of annuity options and get guaranteed lifetime income, which will be directly credited to your bank account. This plan is a smart way to ensure that you have a regular and guaranteed income stream to help your post-retirement needs.

Learn more about Pension4Life Plan.

You can hold these plans jointly with your spouse so that the pension continues after your demise. The income streams, called annuities, are paid till the end of your life and then to your spouse. The fund value would then be given as a lump sum amount to the nominee.

Replacing income is essentially planning for retirement so that your lifestyle continues as is even after your full-time employment comes to an end. Your savings would then work as a financial nest that would give you predictable monthly income so that you never realize that you are not employed any more. At the same time, you can lead a cosy retired life reading your favourite books and watching all those movies that you never had time for, earlier.

Related Articles

Browse by Categories

Get a Call Back

Do you want us to call back Please fill the form below

Annual Income (In Lacs)

Our Products

TERM Insurance PLAN

TERM Insurance PLAN

Whole life cover option available

Increase your life cover with changing life stages

Return of premium & in-built protection options

Multiple premium payment options

Avail tax benefits on premiums paid as per tax laws

ULIP PLAN

Unit Linked Insurance Plan

8 funds and 4 portfolio strategies to invest

Loyalty additions and wealth booster

Return of Mortality Charge is available on Maturity under all three cover Options

Flexibility of switching between the fund options to take benefits of market movements or change in risk preference

Pos Easy Bima Plan

Top Benefits

Hassle free

Get double life cover in case of accidental death

Choice of flexible premium payment and policy term

Avail tax benefit on premium paid

Frequently Asked Questions

How Savings Plans by Canara Help You?

Every person has a unique reason to save and invest. With ULIP savings schemes, the company caters to people seeking wealth creation through capital appreciation. Contrarily, the traditional plans can help you save for important life goals without worrying about the fluctuation in fund value. All major savings plan offers partial withdrawal facility that can help you take care of unplanned contingencies. With savings plans from Canara HSBC Oriental Bank of Commerce Life Insurance, you get adequate flexibility while investing and receiving the savings benefits.

Who should invest in a Savings Plan?

Savings plan require you to invest a pre-decided amount on a regular basis. People with a regular stream of income who require a lump-sum amount after a period should opt for a savings plan. Working professionals, self-employed people and businessmen should consider a savings plan to meet their long-term financial obligations. Savings plans are also ideal for people who are risk-averse and want to accumulate funds through relatively safer mediums. These plans inculcate financial discipline in policyholders which make them crucial for every portfolio.

What is saving plan?

A savings plan is likely to be different for everyone depending on the financial goal, risk profile, returns, and investment horizon. If you are young and want to save for your retirement, ULIPs like Invest 4G or Titanium Plus plan would be the best option. You are likely to create a large corpus by your retirement through market-linked returns. If capital protection is your aim, then traditional insurance plans such as Guaranteed Money Saving Plan should be suitable for you.

How much money should you put in savings each month?

The amount that should be invested in a savings plan each month depends on the income, existing financial obligations and the long-term financial goal. If you have a steady income, you should save at least 20% of your monthly income. It is not necessary to invest your entire money into a savings scheme as investments should be diversified. Ideally, you should aim to have a financial buffer of over 10 times of your annual income.

Read More
Saving plan for retirement

The Invest 4G plan with its multiple investment options and various portfolio management strategies for capital protection is an ideal saving plan for retirement.

Saving plan for future

The Smart Goals plan with its unique features such as modification of the sum assured partial withdrawal and fund switch can help you plan for your long-term financial goals.

Saving plan for girl child

The Future Smart unit-linked plan from Canara HSBC Oriental Bank of Commerce Life Insurance is the ideal savings plan for the girl child.

Where should I invest my money?

You should spread your investments across financial instruments. However, having a suitable savings plan in your portfolio is extremely important. It ensures financial stability and also helps in fulfilling short, medium and long-term monetary goals.

What is a good age to start saving money?

When you plan to invest in a financial product, it always pays well to start early. The earlier you start saving and investing, the better. When you start investing early, the capital gets adequate time multiply. Even a small amount invested for a long time can give substantial returns due to compounding.

Tax Saving Investment for retired mother

Savings plans are tax-efficient investment instruments. Samridh Bhavishya traditional savings scheme designed to ensure regular income after retirement is the best savings plan for retired mothers.

Should you use a savings plan for retirement planning?

Yes. Retirement planning is one of the most important financial decisions of our lives. Saving plans offer a host of features that may help you build your retirement corpus. Some of the saving plans like Guaranteed Income4Life offer guaranteed returns at policy maturity. Such returns can act as a regular income stream even after your retirement to help you stay financially stable.

Are saving plans beneficial for managing unexpected expenses?

Yes. Best saving plans in India offer partial withdrawal system that can be utilized during your rainy days. Being financially prepared to tackle such odds will help you manage any unforeseen expenses in a smooth manner.

How to save tax by using savings plan?

Saving plans are known for helping us achieve our financial goals. Best saving plans allow you to grow your wealth while providing life cover. Saving and investment plans are also beneficial for tax planning. Premiums of savings cum protection plans come with tax benefit under Section 80C of the Income Tax Act. Moreover, proceeds received upon the death of the policyholder or upon the maturity of the policy are tax free under Section 10 10(D).

What is the right age to start saving money?

When you plan to invest in a financial product, it always pays well to start early. The earlier you start saving and investing, the better. When you start investing early, the appreciation in capital is significant. Even a small amount invested for a long time can give substantial returns due to compounding.

Read More
How a savings plan can help in building your child’s education fund?

Saving plans help in building wealth over time against the investments that you make. Choose the best savings plan to build an education fund for your child. The best saving plan for kids offered by Canara HSBC Oriental Bank of Commerce Life Insurance eases the stress of planning your child's future by providing a lump-sum payout on the investment.

Read More
How Savings Plans by Canara HSBC Oriental Bank of Commerce Life Insurance can help you?

Every person has a unique reason to save and invest. With ULIP savings schemes, the company caters to people seeking wealth creation through capital appreciation. Contrarily, the traditional plans can help you save for important life goals without worrying about the fluctuation in fund value. All major savings plan offers partial withdrawal facility that can help you take care of unplanned contingencies. With savings plans from Canara HSBC Oriental Bank of Commerce Life Insurance, you get adequate flexibility while investing and receiving the savings benefits.

Read More
Call BackCall Back Pay PremiumPay Premium
Chat
Back to top