This gives a chance to your home-grown “family” experts to hold court more effectively. Towards the end of the year one topic of conversation definitely veers towards tax, savings and insurance. Many points of view emerge, and you might get lost in the various options being discussed.
One reason contributing to the confusion is that many know their favourite option very well and not as much the others. So, if you follow the financial advices of your friends and family your portfolio will be more suitable to cater their needs rather than yours.
Thus, make sure to identify and acknowledge your financial needs before selecting the investments. Here are four best options for you to consider based on your financial goals.
These four options can cater to either multiple goals or very specific goals for you:
1. Guaranteed Savings Plans
Guaranteed savings plans are, as the name suggests, plans with guaranteed maturity values. You can estimate the maturity value of the plan right at the beginning of your investment. These saving plans are best option for long-term but very important goals, where you need a specific sum of money.
Since life insurers provide guaranteed savings plans, you can expect the plan to have following features and benefits as well:
- Life insurance cover
- Tax benefits under section 80C and 10(10D)
Apart from these benefits, the best guaranteed savings plans also offer the guarantee of achieving your goal. For example, Guaranteed savings plan from Canara HSBC OBC life insurance has the goal protection option. This option allows your family to:
- Receive the life cover sum assured immediate upon your untimely demise
- Receive the intended maturity value from the plan as if you were always there with them
Goal protection option ensures that your investment continues even after your demise, and your family receives the maturity value you intended. This savings plan can be your best option for saving towards marriage and higher education goals of your children.
2. Unit Linked Insurance Plans (ULIPs)
ULIPs are one of the most flexible and useful investment options of modern times. If you are the kind of person who is always setting aggressive goals and goes all in to reach the gaols, this option may just be the right one. You have the freedom to choose whether you want to invest in equity or debt or balanced liquid funds.
You also have the option of managing your asset allocation yourself or choose an automatic strategy to work for you. If you want to achieve large long-term financial goals, automation is the best way forward. Automated strategies will keep your portfolio safe from sentimental errors we as humans are often prone to.
Apart from the investment strategies and automation, the best ULIP plans such as Invest 4G from Canara HSBC Oriental Bank of Commerce Life Insurance also offer the following:
- Goal protection option, where investment continues even after your early demise
- Bonus additions for long-term investors
The best advantage of ULIP investment is that you get the tax benefit regardless of which asset you are investing. Also, going forward, all your partial withdrawals are tax-free after the lock-in period of five years. So, you can also think of using ULIPs as your post retirement income option.
3. New or National Pension Scheme (NPS)
National Pension Scheme (NPS) is a government-sponsored pension scheme. Though initially launched for government employees only, now it is open to all Indian citizens between the age of 18 and 60.
If you want a perfect retirement savings solution NPS is second only to a ULIP plan in investments and tops the tax benefit scale. If you use NPS Tier-1 account for your retirement savings you have the following benefits:
- You can redirect your employer’s retirement contributions to NPS
- Full portability means your NPS account number is with you for lifetime, regardless of how many times you change the employer or employment
- Claim additional tax deduction of up to Rs. 50,000 under section 80CCD (1B)
- Enjoy automatic portfolio management based on your age (highest equity allocation of 50% which gradually reduces to 0% at retirement)
There are two main categories in the NPS: Tier I and Tier II. Everyone who joins the NPS comes under Tier I and Tier II has different options. Many options available from banks and financial institutions for NPS accounts for retirement and additional tax savings.
Even if you do not need the tax benefits you can still enjoy growth of your investment with Tier-2 accounts.
4. A Whole Life Term Plan
A whole life term plan is a term insurance policy that can continue to cover your life up to 99 years of age. Whole life term plan is one of the best long-term plans to offer financial estate to your next generation. This plan allows you to automatically convert your normal term insurance cover into an estate if you survive beyond 60.
While you have the option of paying premiums throughout the entire life, you can opt for premiums to be paid only till retirement, i.e., 60 years of age. Your life cover, however, will continue till you are 99 years old or your natural death.
This option has all the tax benefits available to a term life plan under section 80C and 10(10D).
The above four options can cater to – your long-term life goals, wealth accumulation goal retirement goal and estate transfer goal. All four option allow you to invest as per your risk appetite and fund needs in future.