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How to Buy the Best Retirement Plan in India?

dateKnowledge Centre Team dateMay 04, 2021 views221 Views
How to Buy the Best Retirement Plan in India?

Do you dream of the day when you can wake up and can choose not to go anywhere for work? That is usually called the retirement dream. The retirement reality could easily beat the retirement dream if you can ensure financial stability post-retirement. The key to post-retirement financial stability is your ability to plan, save and invest adequate money in your working years.

One of the key components of delightful retirement is your choice of investment plans for retirement. But, how do you know:

  • Which plans you should allocate your hard-earned money to? And
  • How it will help at the time of retirement or afterwards?

So, how do you choose the best retirement plans? Follow these 4 simple steps:

1. Plan that Offer Inflation-Adjusted Returns

There are only a few instruments that offer inflation-adjusted returns. Equity stocks are one of them. Also, because investment risk on equity stocks varies from low to very high, you can invest in a portfolio of low-risk stocks.

Although the risk or volatility of this portfolio will still be higher than debt funds, you can expect inflation-adjusted returns.

2. Guaranteed Regular Income

One of the two objectives of investing in your retirement goal is to secure an income for your golden years. If your retirement investment plan can offer a stable long-term regular income, it is a better investment option for the goal.

Life insurance companies have always been at the forefront with such investment options, especially if you want to secure a lifelong income for yourself. Plans like Guaranteed Income4Life from Canara HSBC Life Insurance can offer a regular income up to the age of 99.

Thus, providing much-needed income security in the later years of your life.

3. Flexibility of Asset Choices

Asset allocation is important if you want to balance your retirement goal with return and safety. For instance, equity funds are risky but they are the best wealth builders over the long term. However, before you hit retirement, you want your retirement corpus safely parked in debt funds and safer investments.

Also, remember that you need to avoid the taxmen as well, as much as possible. Whenever you liquidate your investments in one asset and move to another asset, you may have to incur the following two costs:

1. Transaction cost – effort and money lost in moving the corpus from one asset to another

2. Tax cost – tax on accumulated interest or capital gain

But, if you can move between the risky asset (i.e., equity funds) and safe asset (i.e. debt funds) within the same instrument, you can save both costs.

One investment option which allows you this flexibility is Invest 4G ULIP Plan from Canara HSBC Life Insurance. You can not only allocate to both types of assets (funds), you can also use an automated portfolio management option.

The automated management sets you free from worrying about portfolio rebalancing over time.

4. Loyalty Additions

Loyalty additions are another feature of the best retirement pension plans. These additions are bonuses, which the insurer adds to your portfolio for any of the following two reasons:

1. Staying invested for a longer period

2. Continuously investing in a plan for a long period

If you have been investing in retirement plans like Guaranteed Savings Plan, Guaranteed Income4Life or Invest 4G, you can benefit from these additions. These additions boost your portfolio growth by adding bonus units (in the case of Invest 4G) or bonus amount (in the case of other plans).

For example, Invest 4G plan will add 0.5% of your corpus in the plan as loyalty addition every five years you continue to invest money in the plan.

Saving Plans with all these Benefits Offered by Canara HSBC Life Insurance

Your retirement portfolio should consist of at least one plan which has most of the features and benefits as discussed above. These benefits help you fulfil the two most important needs of retirement goal:

A. Building a large enough corpus to survive the next 25-30 years after retirement

B. Ensuring a reliable source of lifetime income

While you may invest in schemes like NPS and PPF for your retirement, these plans have limits on the maximum amount you can invest. Exceeding this limit may lead to the loss of certain benefits from the plan.

Thus, you need to start investing in other options while you still have time and are earning. Three such options are:

1. Invest 4G ULIP Plan

2. Guaranteed Savings Plan

3. Guaranteed Income4Life Plan

Benefits of these Retirement Plans

Invest 4G ULIP Plan

  • High-growth using Systematic Investments (SIPs) into equity funds
  • Automated portfolio management to help you manage your portfolio risk without your continuous involvement
  • Tax-free Systematic Withdrawal (SWP) to help you with a pension income after five years of initial lock-in period
  • Loyalty additions and wealth boosters to expedite your corpus growth

Guaranteed Savings Plan

  • Maturity value is guaranteed. So, you can use this plan to fulfil important gaps in your retirement corpus
  • Safe investment option
  • Growth is unaffected by taxes as maturity and accrued growth is completely tax-free
  • Life cover helps ensure the post-retirement financial safety of your spouse

Guaranteed Income4Life

  • As the name suggests, use this plan to create a reliable lifelong income (till your natural death)
  • You can hold the plan jointly with your spouse so that he/she will continue to receive the pension even after your demise
  • Option for insurance cover for critical diseases like cancer, CABG, major organ transplant, etc.
  • Option to cover against accidental total and permanent disability
  • Boosters to improve corpus growth when investing in the online plan, and long-investment period

Choose the Best Retirement Plan for a Happy Retirement

Thus, selecting and investing in the best retirement plans in your employment years will help you build a large retirement corpus. Also, while you can also continue to use some of these plans to generate a post-retirement income, you can have more than one source.

planning your retirement

Using Invest 4G and Guaranteed Income4Life plans together can ensure a tax-free pension till the age of 80, and a guaranteed pension afterwards.

Although the average lifespan will be close to 80 some 2-3 decades from now, you should not forget the age gap between you and your spouse. Add to that, the chances of higher life expectancy of your spouse, and it means that your spouse will need a pension for a longer time.

Using a mix of pension plans allows you to offer the financial safety your spouse will need in her extended lifespan.

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