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Why is it Necessary for Retirement Planning?

dateKnowledge Centre Team dateApril 22, 2021 views131 Views
Why is it Necessary for Retirement Planning?

Vishal was a hard worker, everyone knew that. He stayed up night and day to study for his exams. He bagged a cool job at a corporate. Life was hard, but he knew that an early retirement would solve everything. He started investing in a retirement plan in his early 30s. Imagine his shock when he was barely able to get by. The premium was too high and the retirement plan was not good enough.

Retirement is often envisioned as the golden years of an adult’s life, where they can finally relax after decades of hard work. However, the secret recipe for this happy future is smart retirement planning. It enables financial cushioning post-retirement. Retirement planning comes under the umbrella term of financial planning. It empowers and guarantees a steady source of income post-retirement.

India has seen a rise in retirement planning in recent years since 2018. The reason is the lack of social security provided by the government. This is especially difficult for private-sector employees. Vishal didn’t start quickly enough and when he did, it was too late. Retirement plans are therefore a necessity in India and require early planning.

Why is Smart Retirement Planning Important?

Due to the lack of a consistent pension scheme, retirement plans are gaining momentum in India. Since the pension scheme of the public sector has dwindled, it has become equally important for every working individual to start saving. Where government employees had a pension plan previously, it was removed in the Budget session of 2003-2004.


8 Reasons Retirement Planning is Pivotal for Financial Security

1. Healthcare Emergencies

2. Rate of Inflation

3. Tax Savings

4. Early Retirement Goals

5. Richer Retirement

6. Easy to Build Retirement Corpus

7. Essential for Nuclear Families

8. Lack of Pension Scheme and Social Security

A good retirement plan will take care of three things post-retirement:

  • Healthcare needs post-retirement
  • An emergency fund for the future
  • A source of income post-retirement

How to do Smart Retirement Planning?

Retirement planning works best when started at an early stage. Financial situations are susceptible to change, and it is best to work out a plan when early. Most people wait until their 30s, but the planning can easily be done earlier.

  • The first step for retirement planning is establishing tangible retirement goals. Without a concrete retirement goal in sight, it can become difficult to strategize.
  • The second step is an assessment of the personal financial situation, keeping in mind inflation and taxes.
  • Thirdly, research on prospective investment ideas, including life insurance and health insurance plans.
  • Strategize to ensure that retirement savings are sufficient.

Retirement planning is no longer an option. It has become a necessity. Financial goals today must account for retirement corpus. Some important takeaways about retirement planning:

  • Early retirement planning is smart retirement planning.
  • Retirement planning cannot stop after retirement.
  • Differentiate between wants and needs and be practical about both.
  • Follow simple steps to plan and save retirement corpus effectively.

How Invest 4G can Help you with your Retirement Planning?

Canara HSBC Life Insurance allows you to identify important builders for retirement corpus. Invest 4G is a Unit Linked Insurance Plan that allows you to plan a happy retirement. Invest 4G plan has the following features:

  • Limited premium pay for elders.
  • Loyalty additions that boost wealth creation.
  • Flexibility - pay once or pay for a limited time period.
  • Multiple Portfolio Management
  • Systematic Withdrawals

Retirement plans can be accessible to all. It needs effective planning and is aided by smart strategizing. Choose the right retirement plan for yourself and your family’s future. The 4G Plan is a safe alternative for smart retirement planning and will ensure a financial cushion for you post retirement.

The best retirement and pension plan allow the individual to maintain a good standard of living. A pension plan is necessary even if you want an early retirement. Smart retirement planning requires a financial assessment. Retirement plans are flexible and can be tailored accordingly. To fight the inflationary forces of the market, a retirement plan usually involves deferral of payment for a retirement fund. Planning for retirement ensures a steady source of income for senior citizens. It guarantees a nest egg for one to fall back on post-retirement.

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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

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 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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