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What Is The Best Retirement Plan For The Self-Employed?

dateKnowledge Centre Team dateJune 14, 2021 views152 Views
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On a general note, for self-employed people, there are several planning errors in terms of savings and retirement they make. To enjoy a peaceful and stress-free life after retirement is a dream that many people look forward to. With the help of the best retirement plan, one gets financial security once they retire from their work life. Retirement plans are life insurance plan that allows you to save and grow your wealth to meet your future financial goals. Based on your job profile and lifestyle, you can select your retirement plans.

4 Best Retirement Plans for the Self-employed by Canara HSBC Oriental Bank of Commerce Life Insurance

Buying the best retirement and pension plan will provide self-employed professionals financial security. People who are employed get life insurance coverage from their employers or they buy it on their own. Self-employed people consider buying a retirement or life insurance plan as a financial burden because their income isn’t fixed. Retirement plans will help you devise your insurance plan and help you live a worry-free retired life.

1. Pension4Life

With the Pension4Life Insurance plan by the Canara HSBC Oriental Bank of Commerce Life Insurance, you can save a surplus amount with the help of an annuity. They provide seven different annuity options for you to choose from. Apart from that, the plan offers guaranteed lifetime income, which is directly credited to your bank account. It builds a safety net for the family in case the policyholder passes away with return of purchase price.

2. Guaranteed Income4Life Plan

Guaranteed Income4Life is a non-participating, non-linked individual insurance savings and security plan. Both long-term and short-term financial objectives can be met through its guaranteed payouts as well as monthly income. It is a highly customisable life insurance plan that offers flexibility in terms of premium payment options and payout options. You can meet post-retirement expenses using the monthly income you receive from this savings plan.

Know more about Guaranteed Income4Life.

3. Guaranteed Savings Plan

Guaranteed Savings Plan provides options to pick your savings as well as guaranteed rewards. Your goals can be easily managed through the regular savings enabled by this life insurance plan. Even during times of emergencies or mishaps, these savings will help you strive and reach your goals.

4. Invest 4G

Canara HSBC Oriental Bank of Commerce additionally provides a Life Insurance Plan to protect your family members in the event that you die unexpectedly. It is a unit-linked insurance coverage savings plan that you may customize to meet your own goals and objectives. Because of an unparalleled combination of Portfolio Management Options and flexibility, this package enables you to leverage your investment and coverage needs.

Under this plan, you can choose a scheme which suits you the best, from the varied options that they provide. The income on retirement is directly credited to your bank account. This saves you a lot of time and effort and helps you efficiently address your needs. You can choose on the period of your annuity installment, yearly, in three months, or half-yearly.

Why is it Necessary to have a Retirement Plan for Self-employed?

Having a retirement plan is necessary to live a financially peaceful life post-retirement. As long as you are collecting your monthly paycheck, it is easy to pay your expenses. However, after you retire, you must have enough money set aside to live comfortably for the rest of your life. Taking care of your expenses even after retiring is not as difficult as it seems.

Planning your retirement

How to Prepare for Retirement?

It is important to note that many people fail to prepare for retirement because they begin too late. Instead, the best course of action is to start with what you have and make up the difference later. On the other hand, if you wait for an "opportune" moment, it will be too late by the time you begin.

Another explanation for not starting is that a large portion of one's income is always spent maintaining one's current lifestyle, such as shopping and television binges, leaving less room for retirement. While it is impossible to deny the necessity of meeting immediate needs, finding a balance between the two is necessary.

1. What is your estimated retirement age?

Based on the age you are planning to retire on, you can understand the amount you need to save. Someone planning to retire at the age of sixty might need to save more savings than a person planning to retire at seventy-five.

Every individual decides their estimated retirement age, depending on their family size, income, and work capacity. But one must consider that there can be surprises in life, and there can be a great change in this estimated time frame.

Understand your monthly expenditure: This should involve all the expenditures you might be making every month, such as grocery, light and gas bills, electricity charges.

Your personal needs: Do you aim to sit on your sofa and do nothing once you retire? Well, we hope not. It would be best if you tried to estimate the cost you would be willing to spend on yourself. This can also include your luxury plans, outings, and even travel trips!

Your family's needs: Take into consideration the requirements and expectations your family might have from you. For instance, include the tuition fee of your children here.

It is not that difficult to understand the average monthly need of you and your family. Calculate and understand this cost. Based on this, you must choose your retirement insurance plan.

3. Develop a saving plan

You decide on a saving plan for yourself and stick to it. The amount may be as small as a thousand rupees. As your income increases, your savings may increase.

Being self-employed, the income may differ. However, you must stick to a minimum saving amount that you decide on.

3 Typical Mistakes while Choosing the Best Retirement Plan

Being used to earning for an extended period in your life, isn't it scary to stop the incoming money and depend on other sources? Everyone can't be dependent on someone else to earn and feed them the rest of their lives. To rely on others for your safety, food, security, healthcare is not possible. Hence, choose the best retirement and pension plan by avoiding the following 3 common mistakes:

1. Underestimating your cost of living would be the first one to rank this list. Not buying adequate life insurance cover may not help you in future. You need to understand that once you retire, you will no longer get your monthly income. Hence, calculate your expenses wisely and take inflation into account while figuring it out.

2. You are not considering the risks involved in your investment pattern. For example, inflation. As time passes, the price of things and commodities will also keep rising. So, you need to calculate the amount that you need every month to maintain your current lifestyle in your future.

3. It would be best to choose a flexible portfolio to change plans, as per your requirements. There are a lot of saving plans that offer you the option to manage your portfolio to boost your investments. Explore the available plans before making any decision.

Remember, being self-employed, you might not be receiving any benefits from any company you worked for or from the government. You are your employer. Also, understand how scary dependency on others can be. Hence, it would be best to take care of your future as you do of your present. You must invest regularly and save for your retirement to enjoy a happy old age. This is where the retirement and pension plans come in. It is essential in many aspects such as to lead a retired life, stress-free, to have a tax saving component in your portfolio, to reduce unnecessary expenditure in your early life, to watch small minimal savings grow to an immense amount and to earn higher interest on your money.

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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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