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How to Plan for your Dream Vacation House at Retirement?

dateKnowledge Centre Team dateMay 24, 2021 views347 Views
Plan for your Dream House at Retirement | Retirement Planning

You don’t just work for your present, you work to build a better future for your children, and then one day watch them stand on their feet and tell you to relax. This is what the working class calls retirement. It is a period when you don’t want to worry about the rising kitchen expenses, your phone bills, and hopefully about the size of the birthday gift for your grandchildren.

If this is what your dream retirement looks like, why not enjoy it from the comfort of a vacation home? But the question is – Buying a retirement plan will be enough to support your goals?

What are the Financial Goals at Retirement?

Working with a retirement goal in mind is an excellent way to invest during working life. One important thing is that you must have a definite goal for your retirement. You may want to go on a world tour, or you may want to buy your dream vacation house by the time you retire - be clear of what you want.

Plan for your Dream House at Retirement | Retirement Planning

Having such goals gives you purpose in life and the energy to work hard every day. To achieve your retirement goal, be clear with below:

  • The age at which you want to retire: You may not like to work till 60 years, or you may like to continue work till the age of 65. The first step is to decide your retirement age - when would you like to retire.
  • Decide your retirement goal: You have to be very specific in defining your retirement goal. If you want to buy your dream vacation home, decide what kind of house you would like to have.
  • Calculate the money you will need: You have to decide how much you would need to build your vacation home. Once you have the amount in your mind, it becomes easy for you to create your financial plan.

You may want to buy a vacation house in the outskirts of the cities where you can spend some quality and peaceful time with your family. To have it, you will probably work for 30 years or more.

Is there something that can make the journey easy? Working to earn money is the wheel of one side of your car in your financial journey. The wheel of the other side is your investment decision – the kind of investments you make.

For this goal, you certainly need to focus on investments as chances of securing and using a home loan to buy a new property would be out of the question. You need to understand that after retirement buying a property has to be completely based on your savings. Thus, you need to do the following:

  • Identify the kind of property you’d like to buy and what it costs now
  • Estimate the future cost of this property close to your retirement
  • Find an investment plan and how much you need to invest every year to achieve the goal within the time you have

If you make good investment decisions, reaching your goals will not be a struggle but a happy and memorable journey. Since the journey will be pleasurable, the destination (your vacation house) will be blissful.

How to Save for your Dream House?

You have a clear understanding of your goal, and you decide to start saving for it. When you begin to save, the biggest challenge is to decide which financial instrument to invest in. Few investments stand out when your goal is long-term and large – Invest 4G ULIP from Canara HSBC Oriental Bank of Commerce Life Insurance:

  • Invest in multiple asset classes – Equity, Debt & Liquid Funds
  • Reduce your income tax at the time of investing in the plan
  • Tax-exempt maturity value
  • Online investment and portfolio management
  • Completely automate your investment routine and growth

Invest 4G offers everything you will need to comfortably achieve such goals without having to continuously worry about your investments.

How does Invest 4G Work Towards your Dream House at Retirement?

Invest 4G ULIP offer features that will help you grow your money faster with maximum tax efficiency. Here’s how the plan will help you achieve your dream vacation home:

Invest in a Mix of Assets

The plan allows you to allocate your investment to equity and debt funds in a ratio you are comfortable with. Remember equity means high-risk but also means high-growth, whereas debt is low-risk and more steady growth.

However, equity needs time and a systematic approach to investing. Thus, you should ensure a higher allocation to equity at the beginning of your investment period.

Automate Portfolio Management

Unless investing is your profession or you are quite passionate about financial markets, you should seek to automate your investment management. Invest 4G ULIP gives you four automated portfolio management strategies to use for this purpose:

  • Systematic Transfer Option

    Invest into an equity fund every month, regardless of your investment frequency

  • Return Protector Option

    Protect your returns from equity funds by transferring them to debt as they cross a defined threshold

  • Auto Fund Rebalancing

    Maintains the allocation ratio of different funds as selected by you. Equity growth will lead to the funds flowing from equity to debt and vice versa when debt performs better than equity. This strategy is best for taking advantage of the market volatility

  • Safety Switch Option

    Systematically moves your entire equity portfolio to debt in the final four years of your investment period. Thus, saving the funds from volatility without missing the chance of growth.

With these strategies, you can be sure to participate in the market even when you are too busy with your work and family.

Wealth Boosters & Bonuses

The Invest 4G plan rewards long-term investors with bonus unit allocations. If you are a regular investor and have been paying all your premiums on time, you become eligible for a Loyalty Addition bonus. This bonus adds a few extra units to your portfolio without an additional cost.

Learn how to adjust your investment portfolio post-COVID.

If you stay invested for more than 10 years, you also become eligible for Wealth Booster bonus additions.

Tax-Free Partial Withdrawals

Partial withdrawals from the ULIP plan are completely exempt from tax after the lock-in period. The Lock-in period in ULIP is five years long starting the commencement of the policy. Within this period, it is mandatory to invest in the policy unless you wish to surrender the plan or there is a pending death claim on it.

Tax-free maturity proceeds make it easier to use this plan for any large financial goal. So, if you are planning to retirement happily or early, you need to make a mix of investments. Experts always say not to out all the eggs in one basket. Hence, choose your investment portfolio carefully and diversify it with a mix of assets for gaining returns. Canara HSBC Oriental Bank of Commerce Life Insurance has a wide variety of saving plans that you can consider for your investments.

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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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