Archana and Ashish were relaxing in their balcony. Just then Archana asked Ashish, “Did you ever think about how our retirement would be?”
Ashish replied, “Yes. The first thing what we would do is go on a long vacation!”
Archana smirked at him and said, “And what about finances? How will we manage it in the absence of our regular income?”
Ashish replied, “By the time we retire, most of life’s responsibilities would have been fulfilled. I Agree that the only flip side of retirement is not having a steady, monthly income. Setting a retirement plan in action now, will help us resolve this issue as well.”
I have listed down few ways through which we can ensure regular inflow of income even post retirement
National Pension Scheme (NPS)
National pension scheme is a low-cost and tax-saving investment instrument which will help in building corpus for our retirement. We can choose to contribute monthly, quarterly or annually. On opening an NPS account, we will be allotted a unique Permanent Retirement Account Number (PRAN), which can be used across India. So, even if we plan to move to another city after retirement, no additional procedure will be involved. It offers complete transparency and flexibility to choose the pension fund schemes.
It also provides tax benefit up to Rs. 1.5 lakh under section 80C. In case of withdrawal due to retirement, we are required to invest a minimum of 40% of the accumulated fund to buy an annuity plan which will pay us the monthly pension.
Unit-linked Insurance Plans (ULIPs)
Unit Linked Insurance Plans that is ULIP is a life insurance product that gives you an additional benefit of market-linked returns along with protection. Like any other life insurance policy, we will have to pay an annual/monthly premium. Since it is a long-term investment plan, ULIP is an ideal instrument for our retirement goals. We can choose the policy period of until retirement and pay the premium regularly to get the maturity benefit. In case of any unfortunate incident, the nominee will receive the death benefit. Investing in ULIPs will also provide tax benefit under section 80C and even the maturity amount which we will receive is tax exempted.
Many life insurance companies offer specially designed retirement plans that provide double benefit of life insurance and investment. In the wealth accumulation phase, we have to pay premium regularly, which is exempt from tax. The money accrues during the policy tenure, and at the age when we want the pension to start, we will get regular pay-outs. We can withdraw some amount of the corpus in lumpsum and choose the remaining amount as a pension throughout our life. We will also get life insurance cover throughout the policy term.
In an annuity plan, we will have to pay a lump sum amount to the life insurance company, who will then pay us regular income throughout our lifetime. Thus, we don’t have to keep paying premium amount at regular intervals for a long duration to be able to avail the benefit of regular income after retirement. The insurance companies guarantee a fixed income for the rest of our life. So, we can be stress free with an assured regular inflow of funds.
Starting up our own venture
After having worked all our lives, sitting idle is going to be really difficult. Instead we should make money out of something we love, this will serve dual purpose – efficient use of our time and we will also earn some money. We will actually utilize our experiences effectively.
So Archana, how did you like my route to retirement? Are you willing to join the journey?”
Archana proudly replied, “Ofcourse, your retirement planning surely needs team effort!”