Retirement planning is very crucial for all individuals. Saving a specific amount of money for retirement is one of the wise financial strategies. A retirement plan is a saving and investment plan that supplements the need for an income after the employee has ceased employment. There are many retirement saving schemes available in the market that offer great benefits to help you achieve your financial goals. However, there are also some risk factors involved that makes us skeptical from investing in them.
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Retirement can last up to 30 years or more, and thus having a good amount of money to suffice the need for retirement expenditures is a must. There are many benefits of a retirement savings plan; some of which are discussed as under:
Retirement saving plans serves as long-term saving schemes regardless of whether the depositor opts for a lump-sum payment or multiple payments of small amounts. The savings is assured. These plans also create an annuity that can be further invested to give rise to a steady flow of cash post-retirement.
Not only do these plans serve the need of an income for retirement but the funds can be further used to invest in either the safe government securities or in debt and equity investments depending upon the risk profile. These risks are balanced by the prospects of higher returns.
The policyholder or the insurer can either invest a lump sum amount and get annuity payments right away or can choose a deferred annuity plan that ultimately lets the corpus earn more interest until the withdrawal.
Investors can get a lump sum amount when they retire or in case of the demise of the individual, whichever occurs earlier, thus, acting as a life insurance cover.
Pension plans for retirements are designed to negate the effect of inflation. Some part of the corpus is offered as a lump sum payment at retirement, and some part is utilized to generate steady cash flow for recurring expenses.
The pension policy and plans can be tweaked to get the lump sum payment on retirement or death of an individual.
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Besides these benefits, there are some drawbacks also. Here are some of the drawbacks of savings plan that one should consider before investing in any of the saving schemes available in the market for retirement:
Many plans and policies only allow a limited deduction on the tax. The maximum deduction allowed on life insurance premiums under the Income Tax Act, 1961 is Rs. 1.5 Lakh.
Whenever the investor receives the annuity after retirement, it becomes taxable as of that date.
Many policies and plans are subject to market fluctuations and have higher risks. To receive higher returns on the amount, people mostly opt for high-risk options whose continuity and steadiness cannot be predicted.
We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.
The main thing that one should consider is choosing the best saving plan that will supplement the needs and requirements of retirement. Before choosing any scheme, one should properly analyze and study the features of each scheme.
Here are the best saving plans and investment option for people who want a sufficient income for their retirement:
Also Read - Deferred Pension
The average tenure of this savings plan is 5 years, and it can be extended further for three more years, as per Section 80C of the Indian Income Tax Act, a tax deduction of up to Rs. 1,50,000 can be claimed. Premature withdrawals are also allowed with a penalty.
The retirement savings plan is supposed to be for retirees who aren’t high-risk tolerant. Start investing in these retirement and pension plans to enjoy a stress-free retirement period. Choosing the best saving plan is crucial as it creates a secondary income stream making it smooth for you even after you retire from your work.
Senior citizens investing in SCSS not only enjoy higher interest rates but can also extend the plan’s duration by three years post-maturity.
Source: ClearTax
A retirement planning calculator is a simple tool that gives you an idea of the corpus you can accumulate with a regular monthly investment for your golden years.
The above calculation and illustration of figures are indicative only and not on actual basis.
When it comes to retirement, taxes can quietly eat into your savings if not planned right. While pension plans offer long-term benefits, the way they’re taxed in India varies from one scheme to another—and timing plays a big role.
Schemes like NPS, EPF, and PPF allow tax deductions under Sections 80C and 80CCD. NPS gives an extra ₹50,000 deduction over the regular ₹1.5 lakh limit. If your employer contributes to NPS, that’s also tax-deductible without eating into your personal limit.
Here’s the catch—pension income (annuity) is fully taxable as per your income slab. Lump sum withdrawals may be partly tax-free, depending on the scheme. For example:
In NPS, 40% of the corpus is tax-free; the rest is taxable unless used to buy an annuity.
In EPF, withdrawals after 5 years are tax-free.
SCSS interest is taxable but offers steady post-retirement income.
Most annuity incomes, whether from deferred or immediate plans are added to your taxable income each year. They’re safe but not tax-free.
With the appropriate retirement plan, you can confidently cross life’s uncertainties and adore a worry-free retirement. At Canara HSBC Life Insurance, our alimony affairs are carefully advised to accommodate abiding income, banking protection, and tax benefits, authoritatively rewarding your retirement years.
Annuity: A fixed sum of money paid to someone each year, typically for the rest of their life.
Corpus: The total amount of money accumulated in your retirement account.
Deferred Annuity: A plan where payouts begin after a certain term.
Immediate Annuity: A plan where payouts start right after investment.
EPF (Employee Provident Fund): A retirement savings plan with equal contribution from employer and employee.
A retirement savings plan helps you build a secure financial future by offering tax benefits and long-term income post-retirement. It ensures you're covered even when your active income stops.
Not entirely. For example, NPS allows up to 60% withdrawal at maturity, out of which 40% is tax-free. The remaining amount and annuity payouts are taxed per your income slab.
Advantages include tax savings, market-linked growth, and retirement income. However, limited liquidity and partial taxation during withdrawal can be considered disadvantages.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
