Effective retirement planning helps you to experience a secure retirement. Here are some tips for those people who really want to enjoy their post-retirement lives:
Opt for the best retirement plans
Buying online pension plans is the most convenient way to invest your hard-earned money for better post-retirement life. Once you start investing in this policy, policyholder will get enough money to continue his or her lifestyle even after retirement.
Buy pension plan when you start earning
If you buy a retirement plan early, then it helps you to build a strong financial corpus. In fact, this corpus makes you ready to face any kind of emergency situations without worrying money issues.
Review and update policy
Review your retirement plan regularly to ensure it will fulfill your needs in the future. Do not forget to monitor your progress towards your retirement goal. Consider your current situation, risk appetite, market condition and future circumstances. Remember that all these points impact your pension plan online.
Thoroughly follow your plan
Pay complete attention while reading terms and condition of a retirement plan else person could miss important gains. Don’t keep changing your goals to often because it may harm your planning.
Think about overall effect
In case you feel that buying pension plan online is not worth, then consider its overall effect on your future especially after post-retirement life. This plan is designed to make you financially independent by giving you a regular source of income once you stop working.
After maturity, it will not only pay for your regular expenses but will also pay your medical expenses. Pension plans offer you financial support when you need it the most.
Retirement income fund means any kind of investment product which is available to every kind of people as a stable means of saving for the near retirement. It is popularly known as RIF and is mainly investments in the form of mutual funds. The different types of mutual funds include large or mid-cap stocks and bonds. The portfolio balancing of RIF is done by allowing monetary gains moderately through orthodox approach, this is done so that the bond retains its values in its process of providing a source of income to the people who have invested in the various RIF.
RIFs are very important as they provide stable average growth of different assets of the people which they keep aside for retirement purposes and for this reason these funds are vigorously maintained. One thing people should keep in mind about RIF is that they are not treated specially by the tax department but are treated as normal mutual funds and thus are open to all kind of market risks. Although they are a traditional investment they do not guarantee secured income after retirement. Other than mutual funds there are few other types which pay at regular intervals either on monthly basis or six monthly basis and they require minimum investments.
Types of retirement income funds
There are mainly three types of income funds for retirement plan. These are as follows:
- Target date funds: this type of income fund is designed in two ways. 1. They are designed to help people who have invested for retirement funds to get through retirement ages. 2. Another way in which they are designed is such that by investing in a number of mutual funds people retire to profit from these investments. This type of investment yields low income but it gives people appreciation as this type of investment provides good exposure among the beneficial classes.
- Income replacement funds: are also known as reverse target date funds. In this type of income fund the investment company slowly returns the investor’s invested money plus any kind of capital gain before the company investment policy terminates in any particular year. This kind of income funds has both its pros and cons as people can either gain highly from this investment as the income yield is high or can go through major losses as the loss in this type of investment is steep.
- Managed payout funds: this type of income fund investment is a safe bet as it provides monthly income and there is also a scope for growth in investment. Like all over mutual funds, managed payout funds too are subjected to market risk but one advantage of this is during market lows this kind of investment can either cut its payout amount or can return the investor’s capital. An idea can be formed on how much income this type of fund will yield by looking into its yearly yields.
As retirement income funds are managed by professionals, one does not have to worry about the income distribution strategy, balancing of the income when the market changes or about the allocation of one’s assets. RIFs not only pays a stable amount of return but also keeps up with the rising or falling inflation. The best thing about investing for the future is that people can get lifelong monthly income without giving up hold on their assets.
Do you want to save money and want to use after retirement? Do you need some help to choose the best retirement income fund for you? Then, you have come to the right place. Here we have summarized on retirement savings together with retirement income funds. Have a glimpse at these details as they give you complete information on these retirement income funds and help you find the right path for you.
Most of them are thinking about their future after retirement for this reason only, they are going for these retirement income funds option. If you are also the one who wants to lead a cool life after retirement, then these retirement income funds are for sure going to help you a lot. There are many people still who think there is no need for them to use these retirement income funds but in reality, they assure a peaceful life after your retirement.
You need not have to ask anyone to support you after retirement as these retirement income funds help you to manage your expenses in your old age. It will act as a great investment, which you have done in your life as you can live with confidence with no trouble after retirement. No other investment might help you like these funds support you in your old age when you are in need for money. You will get a chance to pay all your bills without asking anyone.
Research on retirement income funds
All that you need to do for this is to do some pre research on these funds and different plans there before taking any final decision. This way of approach helps you to grab the best retirement plan for you. There are ample resources online where you can gather information on these funds and get help to pick the best one that match with your requirements. These funds will become the best investment for you in your life, which benefits you can enjoy after your retirement. The main aim of these funds is to encourage you to live without any tension.
Know your needs
If you would like to benefit more from these funds, then it is highly essential for you to be aware of what you are expecting from these funds as it helps you to pick the best one for you. Try to sort out all your requirements as it supports you to grab the ideal one for you. If you are unable to find the right option for you, then you can go through tips provided by various advisers there online.
This is one more way, which you can apply to gain more benefits. There are different factors, which you have to consider while going for these funds. Know about these factors because it will support you to pick the ideal option for you.
Most of them go for these funds without having knowledge on these funds but it is very important for you to understand about retirement income funds before only. Because, it helps you to benefit from these funds after you retire.
How will your retirement look like? Have you thought about anything on retirement planning? This is something, which you should spend some time on. Our parents and grand-parents might not have given much importance to their retirement, they might have just took it as it came to them, but can we also afford to do the same with our retirement? Would you like your retirement to take shape just like your parents? Let’s discuss it and take some food for thought from this article today. This is the 3rd and last article in the series called “Financial Planning and Social changes in India.
In our country, where a very small number (less than 10% of the workforce which is in the organized sector) has access to some social security like provident funds, but the rest – almost 90% of the workforce – has no social security, Retirement Planning is a major issue. If you take care of your retirement planning, your future will probably be much better and in control than without doing anything. It has become extremely important to plan for one’s retirement and at least take a step towards it. I will list down some pointers which shows why retirement in future India will be much bigger and serious issue. Look at all the points in totality and you will realize that planning for owns retirement is not just an option but a necessity these days.
1. Increase in life expectancy in India
One of the major problems while doing retirement planning is to assume how long the retirement will last. Retirement plan company this has a direct relation with life expectancy. As a country develops, its healthcare and overall life style level improves and life expectancy increases. You can see the life expectancy in India is moving up and up with each passing decade. It was 49 yrs in year 1970, increased to 64 yrs today in 2011 and is set to increase up to 73-76 yrs in 2040-50 (projections).
2. Increase in Dependency Ratio
Dependency ratio means the ratio of Old age population vs. Young population. To calculate it, just take total population above Age 60 and divide it with population between 15 yrs – 60 yrs and you will get Dependency Ratio. You will be surprised to know that right now in 2011, the dependency ratio is around 5% in India, but in year 2050 this ratio will rise to 15%, which shows you that more and more people are going to be in the old age group compared to young population. See the chart below.
3. Decline of joint family structure
If it was 1970, you could have safely assumed that you will be probably spending your retirement with your grown up kids, playing with your grand children, but is it happening anymore in these changing times? More and more people are moving in different parts of country in search of education, jobs and settling their compared to old times.
Parents on the other hand don’t choose to move most of the times as they feel connected to the same place where they have spend all their life and more than that , they have their social groups at those native places. Very rarely I have seen that parents leave those places where they have spent 30-50 yrs of their life.
Best Investment for your Retirement?
So what’s the best Investment you can do today which will make sure you live happily in retirement? If you thought that it’s some financial product or a strategy to make some extra bucks, you are wrong! I am talking about your Health here. Note that reaching destination is important, but after reaching the destination if you don’t feel joy and happiness and are not able to enjoy the fruits later, all the hard work you will put for reaching for destination will go waste.
You will be living for 25-30 yrs minimum in your retirement, Now if you have all the money, but no proper health at the end, you will not be able to eat what you want, you will not be able to roam around places, you will not be able to enjoy each moment of your life, what’s the use of all your hard-earned money in that case? I would say all your efforts will be waste. This is one serious point I want you to take home today. Think about it.
India has one of the highest populations of youngsters, and with each passing year, more and younger Indians are joining the workforce. At the same time, India is expected to have a population of over 200 million who will be above 60 years in 2035. This section of the population will need to be able to financially support itself as the cost of living and lifestyles change.
As individuals are expected to live for 15-20 years post retirement, it becomes essential for an individual to financially secure his golden years. Added to this is the rising medical cost, which is running way ahead of the normal inflation, and the breakdown of the joint family support system.
Most working individuals in their early thirties may not even think of a life after retirement. By the time they get into their forties, the thought of retirement settles in and then begins the planning - one of the key challenges here is to make up for the time that is lost due to lack of planning early.
For example, if an individual spends Rs 25,000 a month today, at an inflation of 7 per cent, the expenses after 25 years would increase to Rs 1,36,000. Add to this medical expenses, which increase with age and other expenses - the monthly expenses could actually exceed Rs 1,50,000.
Retirement plan is a systematic process, the earlier one starts, the better it is, as this gives one the opportunity to regularly save to build a corpus. The benefit of time coupled with the power of compounding helps to create a substantial retirement corpus.
There are two key phases in the retirement planning activity - the accumulation phase and the annuity or payout phase. In the first one, the individual contributes a certain amount regularly. The annuity or payout phase is when the pension is paid out. The age from which one starts receiving pension is called as the Vesting age.
HOW MUCH DO I NEED?
A systematic approach makes it easier to estimate the amount required after retirement and accordingly select an appropriate financial savings instrument.
Calculate: Based on the current expenses, calculate the amount which will be required to financially support oneself and the family, after retirement. Companies offering pension products have retirement calculators on their websites which can help one to calculate the quantum of money required post retirement for financial independence.
Save: Regularly start saving a predetermined amount of money that will help you build the desired corpus for life after retirement. It is advisable to put aside a portion of your income as savings before expenses, rather than saving what is left after expenses.
PUBLIC PROVIDENT FUND: Public Provident Fund is a 100 per cent debt-oriented investment, guaranteed by the government of India. A minimum contribution of Rs 500 a year is mandatory. This product has a lock-in of 15 years. Partial withdrawals are permitted from the sixth year subject to certain conditions.
While EPF and PPF have been providing returns ranging between 8.5 and 9 per cent (the current returns for 2014/15 are 8.75 per cent and 8.70 per cent for EPF and PPF, respectively), the other pension products have provided higher returns primarily due of the exposure to equities. The below table depicts the performance of equity markets, the probability of positive returns and the expected returns from a regular annual investment of Rs 20,000 in equities.mosimage
EPF and PPF are tax free on maturity. For NPS the entire proceeds are taxable. Maturity amount of unit-linked plans are tax exempt provided the sum assured is 10 times the annual premium. An individual needs to ensure that their retirement planning portfolio comprises of a mix of products mentioned above. The key is to start early, make regular contributions and remain invested till retirement age.