Ankit Kumar is a senior software engineer and works in Infosys based in Hyderabad. One of the best things he did is that he started investing a sum of Rs 10,000 every month in a retirement plan since 1994 when he was 35 years of age. Today, Ankit realises that he needs a minimum sum of Rs 2 lakh each month when he will retire this year. If you look closely at the numbers you will understand that he has obtained a return of seven to eight per cent and the sum has almost grown up to one crore.
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The money stored in the low risk fixed deposit would give him simply Rs 64,000 every month. Now, as he is approaching towards the retirement phase he realizes that Rs 1, 00, 00,000 would not be enough to meet the everyday needs of the family and even the retirement objectives. Moreover, he also realizes that this sum is not enough to meet the monthly expenses. With rising inflation, he realizes that the expenses will double in the coming 12 years. This means that he will run out of funds even before time.
Well, you might wonder that Rs 1, 00, 00,000 is enough for the retirees. However, when you consider every expense such as education of the child, marriage, medical expenses, outstanding liabilities, and most important inflation then the amount will not be sufficient for everyone and such a retirement planning will not give you peace of mind.
Retirement planning is of utmost importance. Primarily, you should think of how your retirement is going to be.
For instance, is it going to be like spending quality time with your family? Or you will be travelling to a foreign land with your family or fine dining with your family and friends at a fancy property/ restaurant? You could also take into consideration the expenses involved in clothing, healthcare, travelling, and so much more.
No matter what, when you are starting the retirement planning calculate inflation specifically when you are simply more than a year or so from the retirement phase. The rule is simple you will be required to replenish seventy to eighty per cent of the pre-retirement income so that you can enjoy the golden years of your life.
In case you are one of those who wish to shield the retirement money and diversify the investments, then you should consider a whole life ULIP. Of course, you are free to consider other investment options too; however, this could be a good choice for your requirements.
The whole life ULIP offers the dual benefit of investment and protection and has been designed to cater to the interest of people until 99 to 100 years of age. Such a plan to take care of the beneficiary and provide them with a death benefit and also takes good care of the living requirements during the retirement phase.
You can avail the whole life ULIP at the age of 18 years to 100 years and have the flexibility to exit any age. Besides, you also get to decide the duration you wish to accumulate or wish to save money, which could be until the retirement phase. Depending upon the age you initiate the maturity benefit will be received at the retirement.
For example, supposedly if at the age sixty years you are expecting the corpus to be Rs 5 crore you need to initiate the investment at least by thirty years of age. The sum that you will be required to invest every month until 60 years of age is Rs 15,000. You have the choice to obtain the maturity benefit either as the structured payout or in a lump sum. On the premise of the requirements or any sort of financial emergencies, you can easily decrease or increase the pension that is tax-free as well. This is a special benefit that is designed in this product and can be opted by people who are looking forward to flexibility at a different stage of life in the coming times.
The Bottom Line
The truth is that retirement planning is important and should not be neglected. It helps you to keep a track on the long-term objectives.
In the above-mentioned case of Mr Ankit Kumar, we see that even though he started saving at the correct average time, however, ended in a not so happy position. Simply because retirement planning was not right.
The best way to start retirement planning is as early as possible and avail best compounding returns and simply not rely upon a single source of savings. Remember, emergencies do not come with prior notice. And at old-age individuals are slightly more prone to it. Therefore, a sufficient wealth corpus is important for the golden years of your life.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
23 Oct 2024
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