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How saving at an early stage of life will help you during retirement?

dateKnowledge Centre Team dateFebruary 18, 2021 views145 Views
How saving at an early stage of life will help you during retirement?

Retirement appears so far away when you're in your early age of life that it barely seems essential at all. It's actually among the most popular excuses individuals make to support not saving for retirement. Someone reaching retirement age would tell you that years pass by, and if you don't start early, it becomes much harder to build a sizable nest. Other costs you do not yet have, such as a mortgage and a family, you would also probably obtain.

As you commence your career, you may not earn a lot of money, but there is one thing that you have more than wealthier, older folks: time. Saving for retirement by investing in one of the best investment plans in India becomes a much more fun and enjoyable prospect with time on your side. Your student loans are currently already being paid off, so even a tiny sum saved for retirement will make a big difference in your future.

Why should you be investing for retirement from an early age?

By starting to invest early in investment plans in India, you give your money added time to compound. Einstein explained compounding as the 8th wonder of the world. And rightfully so, as even the smallest contribution in various investment plans can grow into a safety net for the future when you are not earning a fixed income. Furthermore, with the best investment plan, you can secure the life of your children and spouse even after your demise or retirement from work.

It's very typical to invest in plans that receive returns in line with your short-term financial goals. If you wish to start, you can find best short-term investment options to put your money to good use. However, a lot of people fail to invest at the right time, thinking of it as an extra expense. However, it is an expense that can grow valuable as time passes. The earlier you start investing in the best investment plans, the better financial stability you can enjoy in your post-retirement years. Here are three benefits of starting saving at an early age.

1. Discounted when younger

Retirement plans provide dual insurance and investment advantages. When you are young, the body is far less vulnerable to disease, which lowers the insurer's risk. Therefore, the premium costs are lower.

2. Compounding

The interest earned on the original investment also generates returns if you leave an investment to build up for several years. This results in the rapid buildup, tremendously growing the corpus once you start to invest early; compounding assists in magnifying the investment speedily.

3. Performance adjustment

It is unavoidable that all market-linked investments are uncertain. You have enough time to track the investment's output and make appropriate portfolio changes when you start investing early.

Best investment plans and schemes for an early investor

Investing in the following plans and the best monthly income scheme will help if you are trying to build a corpus for your post-retirement period or preparing a financially stable retirement life. You must note that 'Time' is 'Money' when investing. This means, "The longer you spend, the better your returns will be."

Here we have listed some of the best investment plans to invest in from an early age for retirement:

1. Invest 4G

Financial security and financial preparation for your loved ones has to be the very best. In the event of your tragic death, Invest 4G offers life insurance protection to protect your family and provides you with the best benefit for your hard-earned savings.

It doesn't matter what stage of life you are in. Whether you are a young person getting into the savings habit, a family man building a stable future for his children, or planning for your golden years, your personal financial goals are fulfilled. This investment plan is the solution for anyone and everyone.

What the plan offers

  • In the event of your tragic death, it offers a Life Insurance Policy to support your relatives.
  • Flexibility to opt to pay for the policy's full duration or a short period or just once.
  • The Fund Value at maturity will be added to the mortality charges deducted over the Policy Period for Regular and Restricted Premium Paid policies.
  • Three cover choices to accommodate various stages of life.
  • Premium Funding Benefit under Care Choice to ensure that, even in your absence, your targeted savings contributions are made.
  • Loyalty Additions and Wealth Boosters as an extra allocation of units to raise the savings during the policy period.

2. National Pension Scheme (NPS)

For those who are not too routine with their savings, this government-funded pension scheme is a must-have option. One of the advantages of investing in this scheme is that the funds are invested over a period of time in equity schemes, debt securities, and government bonds. There are other saving schemes where you can invest for getting good returns.

What the plan offers

  • This monthly income scheme is not a one-time investment plan but a dividend reinvestment option in which a fixed sum can be invested regularly.
  • You get a part of the balance in a lump sum upon retirement, and the remainder is transferred into standard pensions.
  • You can expand your periodic investments into a considerable corpus by starting early, which will free you from future financial distress.
  • You can expand your daily investments into a large corpus by starting early, which will free you from future financial distress.
  • Depending on your risk appetite, investing in NPS also allows you to select among the three asset groups - equity, debt, and government securities.
  • The long investment period helps you benefit from an expanded allocation of equity assets of up to 50 percent.
  • Although the money can be withdrawn by NPS subscribers working in private companies after ten years of investment, it is better to let it last until your retirement date.

3. Secure Bhavishya - Guaranteed Pension Plan

Fund your future today to ensure that tomorrow you will enjoy life. To ensure that you lead your life without stress, this investment plan for retirement has been developed. Secure Bhavishya Plan gives you the liberty to plan your retirement and enjoy it just the way you want!

You are doing your best for your dear ones in today's busy working life, but you still need to prepare for your future at the same time. It is prudent to invest in a pension plan to create a retirement corpus that can be used to provide a stable post-retirement income.

What the plan offers

  • Guaranteed Maturity (Vesting) advantage of 101% value of premiums charged (including top-up premiums, if any), only if all necessary premiums are duly paid.
  • It is possible to pay unlimited top-ups based on your retirement needs.
  • Option to select the vesting age and payment period of the premium according to your requirements.
  • Flexibility to pick payment modes for annual or monthly premiums.
  • Loyalty additions to increase your fund's value every five years, beginning from the 10th year of the policy.

4. Smart Monthly Income Plan

Canara HSBC Oriental Bank of Commerce Life Insurance's Smart Monthly Income Plan will help you plan well as you progress towards the golden years of life. It is the best monthly income scheme offering a secure retirement by providing constant monthly income.

What plan offers

  • Get free of tax guaranteed monthly income for 15 years to make your dreams come true
  • Accumulate lump sum cash to build a pool of money for your loved ones with annual and final incentives
  • Build a legacy for your loved ones for 25 years with life cover
  • Improving your lifestyle with guaranteed wages and incentives
  • Opt for the versatility of loans to fulfill your uncertain needs
  • Enjoy easy Premium Payment by changing premiums payable with revenue to be earned in year 11-15
  • Under the scheme, tax incentives will be per the existing income tax laws and subject to adjustment from time - to - time.
  • As soon as the policy obtains a surrender value, you can avail of the loan facility to fulfill your liquidity needs.

Investment at an early age raises the likelihood of achieving financial stability at a young age. It is always a great idea to save for retirement from 20 rather than 40 years of age. Life is more complicated than it has ever been after retirement, so preparing for retirement with the best monthly income scheme will lead to a better life after retirement.

Canara HSBC Oriental Bank of Commerce Life Insurance offers a variety of best investment plans which you should be investing in from an early age in order to make your life after retirement secure and stress-free.

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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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