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How to avoid running out of money during retirement?

dateKnowledge Centre Team dateAugust 19, 2021 views334 Views
Retirement Planning | Best Retirement Plan | Guaranteed Savings Plan

Life can be compartmentalized into different stages with each stage having a broad purpose to attain and move on. All are not fortunate to live through all the stages and those who do live through all the stages may not always experience what that stage is designed for. The exceptions are statistical outliers whereas the vast majority go through all the humdrum of life as designed by the creator.

Childhood is spent in curiosity whereas early adulthood goes in building careers, rearing families, buying life insurance to protect your loved ones and exploring life. The later years are dedicated to consolidating ones’ learnings and earnings besides nurturing the next generation. The final lap or the sunset years are spent closer home, reflecting on life and finally settling into oblivion.

The childhood and growing up years are supported by parents whereas the post-retirement years cause concern because no one can predict the actual life span. The 70-year average means there will be people who will live much beyond that number too.

Enjoy or Endure Retirement?

Fairy tale stories depict retirement as second innings when the old couple becomes free birds again. Travel around the world, do as they please and enjoy every moment of their newfound private space. The kids are independent, the mortgages are paid off and all those items on the wish list now see the light of the day. Far from it. The reality is scary and in contrast to the rosy picture that is generally painted. Lack of financial discipline is putting people at risk of running short of money especially when out of employment during recessionary periods and post-retirement.

How to Have Enough for Retired Life?

Start Early! Whatever you plan to do for a comfortable retirement, start working on it now. 25 is not too early to plan for retirement and 40 is not late either. Some PRO tips to get yourself started on retirement planning:

1. Taper Down on Debts

It is natural to get impulsive to avail credit for buying goods, appliances and holiday packages. Debts taken for buying appreciating assets such as real estate, gold etc is worth it because the returns on investment will be far more than the cost of debt. Depreciating assets burn holes in the pocket.

Spend wisely. Even loans on appreciating assets should taper down with time. Do not carry any baggage post 55/60 years of age.

2. Build a Large Retirement Corpus

If you spend Rs 30,000 to manage your living expenses, this amount, when factored with inflation, will become Rs 90,000 in 20-30 years from now. To get such a pay out from your annuities or pension scheme, you will need a corpus of about Rs 3 Crores.

3. How to “Save” for Building the Corpus

Saving and Wealth Generation are different concepts altogether. Ramesh, aged 40, sets aside Rs 10,000 each month and keeps it in his savings account or fixed deposits that yield 3% to 5% per annum. At an optimistic 5% interest rate, Ramesh will have approximately Rs 40 lakhs in his kitty at the age of 60.

If you factor in the current rate of inflation of 5%, the real growth is actually zero. Building a larger corpus will strain your current lifestyle and health because you will strive to work harder to set aside more money. The trick is to rather make the money work harder than you do. Invest in assets that give inflation-beating returns and create wealth in the long run.

4.Invest in Guaranteed Income Plans After Retirement

Guarantees are trustworthy when assured by credible, reputed entities that have legacy standing and impeccable track records. Guaranteed Income Plans from Canara HSBC Oriental Bank of Commerce Life Insurance is one such investment cum insurance plan that gives you the safety of insurance while growing your wealth to keep you happy in your older years.

a. You can choose to pay premiums for a fixed term after which you will get “Guaranteed Annual Income” every year until maturity or until death.
b. On survival and at the end of the policy term, you will be paid the “Guaranteed Sum Assured”.
c. In case of demise or permanent disability, the insurer pays the future premiums.
d. In case of demise, the Sum Assured is paid immediately to the nominee. The fund value is paid on maturity.

How to Build an Adequate Retirement Corpus?

Retirement is an enigma. The uncertainties can be perplexing and create anxiety even in the most level-headed individuals. Thumb rules help you arrive at a figure that you may need by the time you hang up your boots and call it a day. This kitty is what you will have to draw on for the remainder of your life.

Investing in the right assets is important because you will not get a second chance to go back and rectify errors.

The “right assets” are always debatable and diversification helps spread out risks. So, you may invest in gold, real estate, equities and so on. Whatever you do, you must have a cushion to fall back on, should things go wrong.

Guaranteed Savings Plan and Invest 4G ULIP plans offered by Canara HSBC Bank of Commerce Life Insurance are a few investments that can offer this cushion. The guaranteed plan gives you a guaranteed amount on maturity, which you can estimate at the beginning of the investment. While Invest 4G provides the option to invest aggressively for better growth.

Learn how to check if your retirement corpus will be enough.

The tax-free maturity value from the plan ensures that the value of your savings does not deteriorate due to tax. Thus, you can use the entire amount at maturity to build a pension for your retirement. Additionally, the life cover implies that your family will be adequately safeguarded even if anything happens to you before you can build the corpus.

Guaranteed Pension Plans to Consider

Pension is another form of income. The only difference as compared to your income from employment is that pension comes from your hard-earned income itself, but invested and grown multi-fold by expert pension fund managers. For example, the Pension4Life plan pays pre-defined amounts, called “annuities”, each month after you retire until your death.

There are choices within this insurance policy, offered by Canara HSBC Bank of Commerce Life Insurance Company. You can opt for a single-life annuity wherein you get a pay-out till the end of your life OR opt for a plan that returns your invested amount to your nominee on your demise.

These 2 choices listed above can be applied to a joint-life annuity as well in which case your spouse/partner gets the annuity payments after your demise and returns the invested amount to the nominee after your spouse’s death.

Retirement is not as scary as it is made out to be-if planned well and begun early. Investing in wealth-creating assets will build that large corpus which can then be used to generate income streams in your older 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

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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