4 reasons why Retirement Plans are a must buy

4 reasons why Retirement Plans are a must buy

Everyone likes to enjoy financial independence in working as well as retired phase of life. A Retirement plan focuses on taking care of the financial expenses in the post-retirement phase with the help of accumulated funds. A regular premium retirement plan builds a financial corpus, which would be utilized to give you pension money to enjoy the same financial independence in the post-retirement phase as well.

The retirement plan also offers a death benefit to the family in case of an unfortunate and untimely demise of the life insured. The retirement plan consist of two phases which are the Accumulation phase (where you pay regular premiums to create a corpus) and the Distribution phase (where you consume the accumulated corpus in the form of a pension).

Here are some solid reasons why pension plans are a must-invest:

· Inculcates a Savings Habit

A retirement plan is a dedicated plan to accumulate a corpus that would take care of the post-retirement finances also known as pension plans. A retirement plan ensures that you pay the premiums timely to keep your retirement plan active. Regular allocation in the form of premium ensures you save the requisite amount periodically to gift yourself a worry-free and financially capable retirement.

The earlier you start accumulating for your retirement corpus, the more robust corpus you can build.

· Gain from Compounding

Compounding is a brilliant way to build wealth in the long term. Compounding implies generating earnings on your previous earnings. The more time you give to your investments, the power of compounding will enable it to grow bigger and larger. Retirement plans will offer you the option to invest in the form of a premium and build a retirement corpus with the power of compounding. The longer you stay invested, the larger you are likely to create your retirement corpus.

· Offers a Flexible and Scalable Investment Plan along with Insurance

A retirement plan is a combination of investment plus insurance plan. It is a special category of insurance plans which are designed to meet the post-retirement financial needs. It offers you the platform to accumulate your savings to build your retirement corpus.

Pension plans range from traditional to a unit-linked retirement plan. Based on the risk capability of the investor one can choose the investment portfolio ranging from aggressive to balanced to conservative. It allows you to build your retirement corpus along with ensuring financial protection for your loved ones. With an increase in income, one can also increase the savings in the form of a top-up premium under unit-linked retirement cum insurance plan.

· Safeguards the Interests of Loved Ones

Your life is precious for your loved ones and especially if you are the sole bread earner of the family. During your working years, you ensure that you save enough to meet the short term and long term financial goals of your family.

Along with the investment, the retirement plan enables you to safeguard your dependents financially with its insurance component. In the event of an unfortunate demise of the life insured, the nominee is compensated with the accrued death benefit.

Best retirement plans offer you ample flexibility and good returns to accumulate a concrete retirement fund to live life independently with no financial dependence.

Buy Retirement Plan Related FAQs

1. Why is it important to start retirement planning early?

Starting retirement planning early is important because it gives you more time to build a larger retirement corpus through the power of compounding. The earlier you begin, the smaller would be the financial burden to reach your retirement goals. It also helps you stay better prepared for inflation, unforeseen expenses, and healthcare costs later in life. Early planning ensures financial independence in your retirement years, allowing you to enjoy the lifestyle you desire without being financially dependent on others.

2. How does a retirement plan secure your future?

A retirement plan secures your future by ensuring you systematically save and invest during your earning years. This ensures that you have a steady source of income after you retire to maintain your lifestyle and essential expenses like housing, healthcare, and daily needs. It also provides a financial cushion for emergencies and protects you from becoming financially dependent on others. With a well-structured retirement plan, you gain peace of mind and the freedom to enjoy your golden years with dignity and security.

3. What are the financial growth benefits of a retirement plan?

A retirement plan offers significant financial growth benefits by allowing your money to grow over time through the power of compounding. Regular contributions, when invested in market-linked or interest-bearing instruments, accumulate wealth gradually and efficiently. Many retirement plans also offer tax benefits, which help you save more. By starting early and staying invested, you can build a larger retirement corpus with relatively smaller contributions. Over time, this disciplined approach can provide long-term financial stability and consistent income during retirement.

4. Why is a retirement plan essential for tax savings?

A retirement plan is essential for tax savings because it allows you to claim deductions on the amount invested under provisions like 80C and 80CCD of the Income Tax Act. Contributing to retirement plans such as the National Pension System (NPS) or pension insurance policies also make you eligible for tax benefits. This means you can grow your retirement fund while also saving on taxes each year. In some cases, even the returns or maturity benefits may be tax-exempt, making retirement plans a smart tool for long-term financial and tax planning.

5. How can a self-employed person start planning for their retirement?

A self-employed person can start planning for retirement by first assessing their future financial needs, including living expenses, healthcare, and inflation. Unlike salaried individuals, they don’t have employer-provided pension schemes, so they must rely on personal investments. They can start by investing in retirement-focused financial products like the National Pension System (NPS), Public Provident Fund (PPF), or pension plans offered by insurance companies. Setting up a separate retirement savings account and contributing to it regularly is key. It's also important to diversify investments across mutual funds, fixed deposits, and real estate to build a stable and growing retirement corpus over time.

5. Does a pension plan help in saving for the long term?

Yes, a pension plan helps in long-term savings by encouraging regular contributions and preserving funds until retirement. The disciplined approach can help build a retirement corpus over time, offering financial security and income after you retire.

AN Jan 49/18