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Can you Retire at the Age of 50?

dateKnowledge Centre Team dateJune 01, 2021 views212 Views
Early Retirement Planning | Buy Best Retirement and Pension Plan

Retirement is the last phase of life when you stop working and wish to live a life of leisure and pleasure. Most people retire between the ages of 60-65 depending on their employers’ norms. Self-employed individuals define their retirement depending on their interests, financial, and health condition. Also, self-employed individuals have all the more reasons to plan their retirement.

Whereas most people dream of a retired life full of fun and frolic, the biggest roadblock is the lack of sufficient funds to lead a comfortable lifestyle till the end of one’s life. No one can predict the age of demise but the average lifespan in India has increased from ~63 years in 2005 to ~70 years in 2020 (Source: Statista). This average figure implies that there is a significant population that would live beyond 70.

Early Retirement Planning | Buy Best Retirement and Pension Plan

Mathematics of Early Retirement: Understand How much you Need to Save

As a thumb rule, your retirement corpus should be at least 200 times your monthly income. But as mentioned earlier, this applies to a presumed retirement age of 60. For retirement at 50, building a kitty of at least 250 times your monthly income is required. You will have to live off this money for 20 to 30 years. This will help you work backwards and start saving.

Let us consider an example. If you are currently earning about Rs 1 lakh per month your retirement fund should be

Rs. 1 lakh x 250 = Rs. 250 lakhs = Rs. 2.5 Crores

So how much money should you save each month to reach this Rs 2.5 Crores figure?

If you invest 35% of your monthly income from the age of 30 when you earn Rs 1 lakh per month:

  • Presuming an annual salary increment of 5% and a return on investment of 8%, you will be able to build a corpus of close to Rs. 3 Cr by the time you turn 50.
  • Your salary increments could be higher or lower in some years but at no point in time, you should let your investment fall below 34% of your income.

How to do Investment-Asset Allocation for Early Retirement with Insurance Plans?

In the initial years when you start investing, you must allocate a larger chunk of your savings to equity-focused funds which will beat standard rates of interest and generate wealth for you. You should keep rotating your money across funds such that the wealth generated gradually moves to debt instruments. In Unit Linked Insurance Plans (ULIPs), you must allocate at least 50% of your money to equity, if not more.

As you inch towards your retirement age, you can change allocation ratios such that your wealth is preserved. This is the consolidation phase wherein you put together all the wealth that you aggressively accumulated during the Wealth Creation phase.

What Saving and Investment Plans are Offered by Canara HSBC Oriental Bank of Commerce Life Insurance?

Investment for the long-term requires serious deliberation and consideration of many factors and risks that can affect your dreams and aspirations. Insurance-linked investment plans, from Canara HSBC Oriental Bank of Commerce Life Insurance, are very comprehensive retirement plans:

  • Guaranteed Income4Life
  • Guaranteed Savings Plan
  • Invest 4G ULIP Plan

1. Guaranteed Income4Life

If you need more assurances or are starting investments at the age of 40, you can look at the Guaranteed Income for Life that allows you to invest for 10 years and defer the pay outs by another 5 years.

This plan is the best investment when you are very close to your retirement goal and you only need to preserve your wealth for post-retirement income.

Learn how Guaranteed Income4Life acts as a financial safety net.

2. Guaranteed Savings Plan

Guaranteed Savings Plan is a safe investment option with a defined maturity value and a life cover. Thus, this plan will provide your family’s surviving members with enough money to live through retirement even when you are not there.

This assurance will help you remain stress-free and ensure that your spouse gets a lumpsum amount that should financially secure future expenses.

3. Invest 4G ULIP

On the other hand, the Invest 4G Plan, is one of the most flexible and efficient investment options to aggressively grow your money. You can invest in a mix of equity and debt funds for better growth over long investment tenure.

The plan also has automated portfolio management options, so that you can manage your asset mix without constantly looking. This helps you take advantage of market movements and benefit from equity growth.

Is Early Retirement an Aspiration?

The aspiration of early retirement is in vogue, especially amongst millennials who have also witnessed the boom in entrepreneurship and start-ups across the country and the world. If you belong to this generation, you were probably inspired by the technology revolution and the rise of common men who became IT Czars by working on cutting-edge technologies.

Nursing similar ambitions, you hope to hang up your boots at 50, send off your kids to the Ivy Leagues and go on those dream vacations that you always thought of while at work. This aspiration is not impossible, if you start planning meticulously, focus on wealth creation, and invest systematically. But remember, most retirement savings plans’ thumb rules assume 60 for retirement. If you wish to retire at 50, you will have to invest more aggressively to account for those 10 years.

Read step-by-step retirement planning guide.

Retiring at 50 is very much possible if you can become a disciplined investor and use the right instruments to grow your money. Your investments should work as hard as you do to build the retirement nest that will keep you cosy and safe in your sunset years.

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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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