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Which insurance is best to get guaranteed monthly income after retirement?

dateKnowledge Centre Team dateFebruary 04, 2021 views135 Views
Which insurance is best to get guaranteed monthly income after retirement?

Getting old means one has to get retirement from his job. Retirement is an important phase no one can ignore; many people have retirement dreams. So, it's important to start saving now if a person wants to fulfil his dreams and live happily ever after. The first step is how much a person should save to reach a retirement goal; many people get stuck at this question.

How much should a person save?

According to the thumb rule of savings, one needs to save 15% of one's pre-retirement income if taken to assume that a person has started saving at 25 to 67 years.

15% may seem a lot of your income, but if a person has a savings account with the employer, it counts as a person's annual savings. Is 15% enough? That solely depends on choices one makes before retiring and most importantly, when he starts saving. Any other source of income like pension should also be considered.

Steps on how one can save better

Now, when you know how much to save, let's talk about how to save better.

Step 1- Start early save better:

The earlier you start, the better it is. Early savings means a person's investment has time to grow through all the market's up and downs.

It may seem futile to save when young, and when retirement is far away, but when young a person has time to start saving, the investments also have time to grow and every penny saved equals every penny earned.

Step 2- Delay retirement as much as possible:

The thumb rule that is suggested requires a person to work till the age of 67 because that is the age after which people are eligible for social security benefits. But if a person wants to retire early, he needs to save more.

Step 3- Increase savings by 1% every year:

1% may seem very less, but after 30 years of retiring, he will see the benefits. For example, if he is 20 and increases 1% of his savings, his total savings are increased by 3%.

Step 4 – Check the portfolio:

A fall and an increase in the market can affect the investment a person has. If he has invested too much, it can shift him towards risks, too less invested in stocks won't benefit him. So, one needs to be sure that he has a mix of investment. A regular check is needed on his investment to ensure he has the right amount of stocks, bonds, to meet his goals.

Step 5- Consider the style of investment:

It is important to keep regular checks on investment if a person doesn't have time to opt for a managed account If a person has a managed account then, professional managers do the job. A person can pick the level of risk he is willing to take.

Step 6- Make savings a priority:

Among the various priorities a person has like a house, children, parents, he should make retirement his priority. Be sure to save at least 15% of the income every year.

Monthly income plans for senior citizens

These plans come to provide a person with a normal salary after retirement. Considering the regular inflation investing in a retirement plan has become necessary. The best pension plan will support the old aged when all other income wells dry.

Types of pension plans-

There are plenty of plans available now depending on requirements and income of a person.

Deferred annuity

This allows a person to accumulate an amount by either regular payment or premium payment over a tenure. When the term is over the amount is handed to the person. This scheme provides tax exemption benefit, although only one-third of the withdrawn amount is tax-free. The amount invested in the deferred scheme is locked and cannot be withdrawn at times of emergency.

Immediate annuity

In this scheme, a policyholder can be instantly provided with the pension with the payment of a required amount. A person can choose from various options in an immediate annuity scheme, and the premium paid is tax exempted under the Income Tax Act, 1961.

Annuity certain

In this, the policyholder receives the pension for a specific number of years. The holder can choose the number of years, and if the holder passes away while the term is not over, the beneficiary will receive the amount.

Life annuity

In this scheme, the policyholder will receive the pension till death. If the holder chooses to nominate the spouse, the spouse receives the pension after the holder's death.

National pension scheme

The government of India introduced this for securing the future of the old aged people. The policyholder can choose to invest in equity and debt funds for ensured returns on the investment. The holder can withdraw at least 60%, and rest is used to purchase an annuity.

Pension funds

These provide better returns as compared to other schemes on maturity. This scheme allows withdrawal in emergencies to relieve a person to take a loan. Pension funds remain active for a specific period.

Whole life ULIPs

With ULIPs, the money stays invested the whole life of the investor. Upon retirement, the withdrawal can be made tax free. It also allows withdrawal when necessary.

Guaranteed pension plan

In this pension plan, an amount is provided for a certain period like 5 years, 10 years, 15 years, whether the insured lives till that time or not.

CANARA HSBC ORIENTAL BANK OF COMMERCE retirement plans:

Canara HSBC OBC offers the following pension plans-

Canara HSBC OBC Smart immediate income plan:

This plan offers regular, guaranteed income after retirement. These instalments are provided regularly for a lifetime.

Key features of this plan-

1. Guaranteed income for the whole life.

2. Single as well as joint annuity options.

3. The safety net for the whole family

4. Higher-income for high purchase options.

5. Instalment income flexibility.

6. Avail tax benefits with the scheme.

Benefits of the plan

Lifetime income with death benefit:

The policyholder receives regular income the whole life, and if death occurs, the purchase price is returned.

Death benefit:

The purchase price is returned, and any remaining instalments are also returned to the policyholder's family.

Eligibility for the plan

Factors Minimum Maximum
Age ( as on the last birthday) 30 years No limit
Purchase Price (Single Premium Rs 2,00,000 No limit
Annuity term Till The Death Of The Annuitant (single Life) Till The Death Of The Last Survivor (joint Life
Annuity payout frequency Annually, Semi Annually, Quarterly & Monthly -
Annual annuity installment Rs 12,300 (Single Life), Rs 13,494 (Joint Life) -
Freeland period 15 Days/ 30 Days (for Distance Marketing Channel) From The Receipt Of The Policy
Grace period Nil
Plan type Offline

Canara HSBC OBC Life Smart Future Income Plan-

It's a traditional income plan with monthly income and profit that allows a person to enjoy his current lifestyle even after retirement.

Key features of this plan-

1. Guaranteed income for at least 15 years of the policyholder.

2. Extra income provided through annual and monthly bonuses.

3. Premium and payment tenure is limited.

4. Loan benefit in case of emergency.

5. Enjoy a high sum of returns that are assured.

Benefits of this plan

Death benefit-

The higher benefit applies to the already existing death sum assured benefit and annual bonus on the policyholder's demise.

Maturity benefit-

If the policyholder holder is still alive on the plan's maturity, he receives an annual bonus and final bonus.

Guaranteed income benefit-

Guaranteed monthly income for at least 15 years of the policyholder is payable to the insured at the end of the policy's 121st month till the end of the policy term.

Annual bonus-

This is added to the income of the policyholder every year, depending on the profit fund. There is an interim bonus applicable in case of demise of the holder.

Eligibility for the plan-

Factors Minimum Maximum
Age ( on last birthday) 18 years 55 years
Maturity term 43 years 80 years
Policy term 25 years
Premium payment term 10 years
Premium paying mode Annually & Monthly
Monthly income Rs 5.000 No limit ( subject to underwriting)
Premium amount Depends On The Entry Age, Monthly Income And Premium Mode Chosen No limit ( subject to underwriting)
Sum assured 100 Times The Chosen Monthly Income
Free Look period 15 Days/ 30 Days (for Distance Marketing Channel) From The Receipt Of The Policy
Grace period 30 days
Plan type Offline

Canara HSBC OBC Life Samridh Bhavishya Plan

This plan provides the insurer with regular guaranteed income post-retirement. It provides annuity instalments throughout the lifetime of the insurer.

Key benefits of the plan-

1. Guaranteed regular monthly income

2. Payments that are provided regularly to the person and his partner.

3. Multiple annuity options to choose from.

4. Options to receive payment whenever required by the insured.

5. Increase in the income that is regularly paid at the purchase price.

6. Tax benefits also available.

Benefits available on this plan-

Annuity benefits:

1. Lifetime annuity- these are regularly paid over the years until the insured's death after that no bonus is paid.

2. Lifetime annuity with a guaranteed 5/10/15/20 years period: the payment is paid until the completion of the chosen term.

3. Joint Life, Last survivor with 100% annuity to the secondary annuitant on the primary annuitant's death: instalments are paid at an informed rate until one of the insured is alive. The purchase amount is 100% payable.

Death benefit:

The amount is payable until the completion of the guaranteed payment period. In the case of the above mentioned third option after the second insurer's death, the payment will cease.

Eligibility for the plan

Factors Minimum Maximum
Age ( as on last birthday) 30 years No limit
Purchase Price (Single Premium Rs 2,00,000 No limit
Annuity term Till The Death Of The Annuitant (single Life)- For Option A & C Till The Death Of TheAnnuitant Or End Of Guaranteed Payment Period, Whichever Is Higher- For Option 3
Annuity payouts frequency Annually, Semi Annually, Quarterly & Monthly -
Annual installment Rs 1,000 (depending On Entry Age And Minimum Purchase Price)
Free Look Period 15 Days/ 30 Days (for Distance Marketing Channel) From The Receipt Of The Policy
Grace period Nil
Plan type Offline

These life insurance plans ensure a better future after a person retires. A person can opt for any one of these monthly income plans for senior citizens to avail assured benefits. Prepare for the wellness of your golden 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 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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