People often wonder what they will resort to when they can no longer work as they can now. Saving up money is never enough for you to live your life with the same standards after retirement. Fortunately, there are many financial institutions that can help you with this. There are a number of plans that you can be a part of to ensure a great, financially sound life once you retire, one of them being the pension or retirement plan. If you, too, are planning to ensure that you have a rather soothing time after your retirement, as opposed to the tension and stress of making more money, reading this article will surely help. Here is everything you need to know about the retirement investment plan.
How would you explain a retirement plan?
A retirement plan is essentially a type of investment plan that allows you to save up a small part of your overall savings over some time. Instead of saving the same amount of money at home, you can choose a bank to do this. In addition to ensuring a lot more safety, a bank will also pay you interest on the sum. Once you have retired, you can take out 33% of the whole sum in lump sums, and the rest of the funds will be paid to you as a monthly income for the rest of your life. Basically, a retirement plan will help you deal with any uncertain expenses post-retirement while also making sure you get a regular income. More so, a pension plan can also provide your life insurance cover. This further makes a retirement plan quite profitable and crucial, even if you have a good amount of savings.
Types of pension plans you can find in India
The Indian banks offer a versatile list of choices when it comes to pension plans, each catering to the specific requirements an insurance seeker might have. Based on the plan benefits and structure, these plans get classified into different groups. Here are eight categories of these plans are categorised in:
- Deferred Annuity
- Annuity Certain
- Immediate Annuity
- With Cover and Without Cover Pension Plans
- Life Annuity
- Guaranteed Period Annuity
- National Pension Scheme(NPS)
- Whole Life ULIPs
- Pension Funds
- Defined Contribution
- Defined Benefit
These are some of the top investment plans in India that you can check out.
How the plans are paid
There are essentially two ways retirement plans are paid, either by a single premium or in systematic regular intervals. Each plan from the aforementioned types has its own benefits and payment methods. So, before you buy a pension plan, you must read the sales brochure very carefully. As you are reviewing the retirement option plans, you will most likely come across certain terms. It is imperial that you understand what they mean to make a decision best suited for your situation. Some common terms include:
- Accumulation phase:
This denotes the period for which you will have to pay the premium, further helping build the retirement corpus. These should include your working years when you are earning a steady income.
- Vesting age:
This is the age or year you plan on retirement. Whatever age you choose is when you will start receiving your retirement income. For instance, if you wish to retire at age 59, that would be your vesting age.
- Annuity phase:
This shows the period after your retirement and when you will start receiving the pension.
Who is eligible for a retirement plan?
Banks impose three main criteria that you have to fulfil to ensure that you are eligible for a retirement plan in India, namely:
- Entry age:
You can only purchase a retirement plan once you have reached a certain age. While for different insurance plans, there are different age brackets, usually the minimum required age is 18 years. Nevertheless, you will also find some companies for which the entry age is 30 years. Similarly, there is a maximum age cap as well, which in most cases is 70 years.
- Premium:
Each policyholder has to pay a minimum premium amount to be eligible for the retirement plan. The reason behind this is that pensions are received according to the premium you will pay. Hence without a minimum amount, the banks will not be able to satisfy your payment.
- Vesting age:
As mentioned above, the vesting age is the age when you will start receiving your pension. While the most common vesting age in this industry is about 40 years, it can go up according to the limit offered by the insurance provider.
Now that you know the fundamentals of a retirement plan, you can judge how advantageous it is for you. Rest assured, with such a fool-proof plan, you will surely be stress-free post your retirement. Before you finalise any deal, make sure you consult an expert on this subject.
