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How Insurance helps with Retirement Planning

“Retire Rich, Go away Happy”

Gone are the days when pension alone was the security blanket for the golden years of an individual's life. The past few decades have seen a rapid escalation in the growth of the private sector as more and more youngsters are opting for the dazzling city life and a 9 to 5 job. This has resulted in an escalation in early retirement plans and people looking for the best possible options are becoming a commonplace thing.

However, what’s interesting to note is the rising popularity of insurance policies as an additional and sometimes, even the main source of securing a hefty retirement fund. With a host of specialized retirement insurance plans available online, finding one that suits your needs has become both easier and at the same time, more difficult.

What Is A Life Insurance Retirement Plan?

retirement plan or a pension plan essentially is an insurance policy that requires you to make financial contributions or investments to a number of funds that are set aside to help with your post-retirement years.

Most Indian retirement plans available are divided into two parts:

  • Accumulation
  • Distribution

As the name suggests, Accumulation refers to the contributions made by an individual over the term period, invested in different kinds of funds. This is done in the form of premium payments.

This accumulated wealth is then invested in securities to help further grow the accumulated sum.

Distribution refers to the post-maturity period wherein you start receiving returns on our savings and investment. You receive regular income. You also have the option of withdrawing up to 33% of the entire sum at one go.

Annuity plans, on the other hand, pay you the pension as per the opted mode. You can choose from monthly, quarterly, or even annual payments.

Types Of Retirement Plans

These are the types of pension plans available in India:

Deferred Annuity

This pension scheme allows the policyholder to accumulate funds through regular single premium plans over a fixed tenure. Once this term ends, the pension benefits begin. The associated benefits are usually massive including tax exemption on the amount invested until withdrawn.You can choose to pay regular premiums or buy it in one go, depending on your needs and resources.

Immediate Annuity

In this type of pension scheme, the pension starts immediately. It begins as soon as you deposit the first premium. The amount invested is also exempted from taxation under the Income Tax Act, 1961.

National Pension Plans

This scheme was introduced by the government of India to help people save better for their post-retirement years. However, now it allows you to not just save but also further invest your savings in both equity and debt market. Further, it allows you to withdraw 60% of total savings at term end while the rest can be used to purchase the annuity. However, the maturity sum is not eligible for tax exemption.

Can Whole Life Insurance help plan your retirement better?

Whole life insurance refers to a policy that covers the policyholder for life, which means up to 100 years. In case of the unfortunate death of the holder, before the term is up, the assured sum along with any bonuses is duly paid to the nominee. Otherwise, the policyholder receives the endowment sum on maturity. This sum can also be received in the form of partial withdrawals or regular payouts after completion of the premium payment term. This setup can help a person in the post-retirement period.

No matter which way you choose to save for your sunset years, it is important that you do it with caution and with an efficiently thought out process. Your retirement plans not only need to be financially well planned but also need to be planned in a way that aligns with your personal retirement plans.

The sea of information available online can get overwhelming and leave you confused. Thus, in an attempt to help you make the best of investment plans to secure that perfect post-retirement life, we bring to you a couple of pointers:

1. Plan Ahead

Investing early in a retirement plan would ensure that you have sufficient funds for when you retire. Not only that but the longer your funds stay invested, the higher your cash growth will be.

2. Consider Your Personal Retirement Requirements

Before investing in any pensions scheme, you need to carefully plan your retirement budget. Depending on the lifestyle you wish to have and the benefits you wish to enjoy, you can choose a scheme best suited to your needs.

Also, don’t forget to factor in the inevitable inflation rate while making any decision.

The Inflation Rate will not only play an indispensable role in your investment but if used smartly, can help you save even more than you expect to, in the long run.

Thus, before undertaking any sort of investment decision, make sure you factor in the current and expected inflation rate.


Insurance policies are a great way to invest your savings and secure a bountiful retirement fund. The sooner you start and the smarter you invest, the better you will save!

Jul 60/19

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