5 things you don’t have to worry about with Retirement & Pension Plans

Savings are never enough when you are used to having a regular source of income for a long period of time. You are spending your entire adulthood in that daily 8 hours long shift to ensure a better retirement. Aren’t you imagining yourself sitting on a rocking chair with a newspaper in one hand and tea in another, or maybe having a world tour with your spouse?

You must be having a plan for retirement, but do you have a retirement plan to enjoy the twilight years of your life? Retirement is a stage where medical attention becomes a basic need. When you no longer receive the credit messages for your salary, you must have a budget to take care of your expenses. Ideally, to maintain your lifestyle, keeping in view the rate of inflation, you need at least 70-75% of pre-retirement income. By understanding your needs and desires, you can opt for a well-informed pension plan.

Having a pension plan is like sowing a seed that will ripen into a fruitful tree, which would give you mental peace and save you from financial distress. Sowing seed and taking care of it is like paying the annual premiums till the age of maturity of your pension plan, i.e. till you reach the retirement age. This is called the accumulation stage.

Now the tree is ready to serve you with annuities till you are alive, and this is called the vestige stage. There are many pre-designed or customised pension plans that will help plan your retirement well in advance.

If you are all set with a great retirement & pension plan, you will not be worried about the below-mentioned concerns:

1. Inflation & Rising Medical Tensions: In our economy, inflation is the only constant. With the rising cost of living and medical expenses, tension and stress also tend to increase. This might make you run out of savings. How about generating a recurring source of income? Every year our country witnesses an approximate 4-6% jump in inflation rates; having such a surge will affect your retirement expenses.

As is the rule in business studies, planning is the first step of accomplishment of any goal; likewise, it is of utmost importance that you plan your retirement well in advance to avoid mental and financial distress. In the hope of great health, you can’t decline the fact that with increasing age, medical issues do eventually come into your life, which can burn out your savings. Hence, proper planning for such medical emergencies should be taken care of.

2. Family Security: You must be worried about your family in case of your unfortunate demise. In a few retirement benefit plans, in case of demise of the plan holder and his/her spouse, the legal heirs (eventually children or spouse, in case spouse is alive) will receive a lump-sum amount. There are a variety of plans available in the market which offer different benefits, some might include your spouse, or others may include your children as well.

3. Taxes and other related benefits: In accordance with the provisions of the Income Tax Act, 1961, there are multiple tax benefits for individuals who are over and above 60 years of age. With high exempted income, these benefits include deductions for annual premium subject to the limits prescribed in the Act. To add the cherry on the cake, the lump-sum amount to be received on maturity will be tax–free.

4. Enjoyment & Independence: When you have money in the prime of your life, you might not have enough time to enjoy its benefits. Having a good retirement plan will ensure that’s not the case when you have enough time to do so in the latter years. Being independent during this phase also relieves the financial pressure on your children for your day-to-day or other major expenses. A retirement plan comes with multiple benefits:

• It will ensure your financial independence.

• It takes away all your stress associated with the need for regular income till the day you are alive.

• You can live on your own terms without being answerable to anyone.

5. Compromise with living standards: In your retirement, when you no longer rely on a 9-5 job for no steady income, maintaining your lifestyle along with other expenses can be like climbing a mountain in heavy wind. But with a well-rounded pension plan, you can continue to maintain your present lifestyle without any compromises and on your own terms. In case the expenses even increase due to medical or other ad hoc expenditure, you will be financially secured to cover them too.

Requisites for buying Pension Plans in India

• You must attain a minimum age to enter, i.e. 30 years of age as of date, and must not be older than 75 years of age.

• In case you are planning for early retirement, the vesting age starts from 45 years of age in most pension plans.

• Any other requisites demanded by the offering company.

If you too have some post-retirement goals, then you should plan a way ahead to accomplish the same in the same manner you dreamt it. For that, the most important step is calculation. You must have an estimation of the amount you would be required to maintain your post-retirement life considering inflation.

As early you start planning your retirement, the easier it will be. Usually, we start worrying about our retirement in the late 40s; well, it’s better late than never. In a country like India, where we have no social pension plans, you should secure your golden years by including retirement in your financial strategy.

Uncertainties like COVID-19 can appear anytime to test you; you must be prepared for it, as it’s well said, “Hope for the best and prepare for the worst”. Along with the contingency account, a good pension amount can support you in your difficult times. Although if you are anyhow getting an option for the state-funded pension plan, that would not be enough as that is a minimal compensatory amount from the government. Hence, it is better to gift yourself a self-sponsored pension plan.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes