Freelancers, here's how you can save for retirement!

How to save for retirement as a freelancer

Freelancing in India is no longer an alien concept. Actually, it has boomed so immensely that 1 out of every 4 freelancers in the world hails from India! When it comes to the preferred form of employment, being your own boss rules the list. Freelancing Is filled with hoards of perks: no boss, no fixed office timings, no corporate set-up, better work-life balance (the list goes on)

One major roadblock, however, is this: no employer-sponsored retirement plans or life insurance covers! So the question that often riddles freelancers is how to they save up for their retirement?

The first step in planning your retirement is choosing the investment plan that suits you the best. Let’s look at the various retirement plans that are especially suitable for freelancers!

TERM INSURANCE PLAN

Term insurance is one of the most favored and advised life insurance plan. As the name suggests, this is valid for a specific period and offers death benefit to the nominee if the policy-holder passes away within the said term.

Pros:

  • Life cover up to 80 years.
  • The most striking advantage of term insurance investment plans is its low premium. So, the money you save here can be used to invest elsewhere!
  • Tax benefits on all premium paid as per section 80C and 10(10D) of Insurance Act 1961.
  • In addition to that e-term insurance is even more reasonable because the entire process is done online, hence there is no agent as the middle-man.

INSURANCE THAT DOUBLES UP THE PREMIUM

Unlike term-insurance, this traditional life insurance provides insurance coverage for the entirety of your life, not just for a specific time-frame. This a good choice for a retirement plan as it will double up the premium you have paid, after maturity. And in case of untimely death, it will take care of your family financially.

Pros:

  • Freedom in choosing term and premium payment
  • Doubles up the premium paid
  • Tax benefits on all premiums paid.

TRADITIONAL LIFE INSURANCE WITH CASH AT REGULAR INTERVALS

Freelancing does not always ensure a steady monthly income. This can often hinder major check-points of our lives: marriage, new car, house, kids, or health issues. With this term insurance investment plan, the policy-holder gets a sum of money at regular intervals, in addition to guaranteed maturity benefits. Plan your retirement using this kind of a plan to ensure a peaceful retired life in addition to meeting goals whilst freelancing!

Pros:

  • Guaranteed cash every 5 years to take care of important milestones of life.
  • Guaranteed premium on maturity.
  • Tax benefits on all premiums paid.
  • On top of everything, the policy-holder shall receive guaranteed additions depending on the chosen policy term.

UNIT LINKED INSURANCE PLAN

This product combines the best of insurance and investment. In this, you pay a premium for as long as you work. This accumulates a sum which is provided to the policy-holder after their retirement. This plan works much like a mutual fund. When you purchase units in a ULIP, you are purchasing units along with many other investors, quite similar to a mutual fund.

Pros:

  • Highly flexible and customizable according to your needs.
  • Various fund options and term plans available.
  • Tax benefits on all premiums paid.

SAVING CUM LIFE INSURANCE PLAN:

You can also plan your retirement by a plan where a certain amount is kept for life insurance, while the rest is invested by the life insurance company. In this retirement investment plan you pay a sum of money as premium, for a period of time (say 12 years) and then get returns for a certain period (11 years in this case). In case of sudden unfortunate death of the policyholder, an immediate stream of income gets generated for the next 12 years. This retirement plan ensures that you spend the days as a retired freelancer without a worry, as far as steady cash in-flow is concerned.

Pros:

  • You get double of the premium you’ve paid.
  • Immediate cash inflow in case of death.
  •  Tax benefits on all premiums paid.

REGULAR OR ONE-TIME INVESTMENT PLAN:

Freelancers have their minds all over the place due to the nature of their work. Although important, it sometimes gets quite difficult to keep a track of monthly or quarterly premium payment schedules of insurance and investment plans. To escape this hassle, there is another investment plan on the block for you. In this type of investment, you need to pay a lump sum of money at one go, or regular payments for a shorter period (say 10 years). Once the premium gets paid in full, you get a secure mode of regular income for your years as a retired freelancer.

Pros:

  • One-time premium payment ensures substantial cost-cutting, which is quite helpful in the freelancer’s way of life.
  • There is no need to constantly remember premium-payment dates.
  • Since freelancers don’t always have a steady source of income, a one-time payment is often the preferred choice.
  • Paying a large sum of money ensures that the money is not wasted elsewhere, which is often the case for young freelancers.
  • Guaranteed return of 210% of the paid premium.
  • Tax benefits on all premiums paid.

Summing up, it is absolutely mandatory to get insured, even though you might have ideas against it. These plans make life simpler, take care of unforeseeable events and most importantly, give freelancers the security they need post-retirement.

Feb 50/19

 

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