It may have never occurred to a twenty year old that planning for retirement is essential. According to a recent survey only 31% of Gen Y workers who are eligible to put their money into a retirement savings plan, actually do so. However being young gives you an edge if you want to retire rich. If you start saving early it will provide greater security down the road. By managing your money efficiently you are unlikely to face major financial issues in the days to come.
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By investing in smart retirement plans in India you can look forward to leading life king size after retirement. You should not overlook the fact that financial independence is one of the top priorities for retirees. It is a stage when individuals can make new beginnings and indulge in activities for which they did not have time earlier, perhaps due to family obligations or shortage of funds.
After retirement, your income will decline but life will not come to a halt. You would not want to lower your standard of living or change your lifestyle due to lack of funds. The retirement plan you choose should match the requirements of the lifestyle which you would like to continue after retirement. With the fast increasing inflation rates in India, it is imperative to keep inflation in mind when you narrow down on a retirement plan. At an early age, an individual is in a better position to experiment with new ventures which might not have 100% success chances but generate higher income later. Further, it is important to take into account the age at which you plan to retire.
Deferring retirement planning is a mistake which most youngsters make. For most, saving for retirement may mean just contributing to employee provident fund or the public provident fund. Most do not correctly estimate the amount of money they will need at retirement. The young are more focused on buying a home or investing in a car. Starting early means that you will have to save lesser to create the same corpus as you have time in hand. When you start saving early, you can take risks. You can consider investing in equities which are risky but yield high returns. If you want to save for the next 25 to 30 years, you can invest in stocks. As retirement approaches, you can liquidate the high-risk, high-return investments and shift to fixed income options which are safer.
You can successfully save for retirement if you differentiate it from short and medium term goals. These goals may include financing your child’s education or meeting medical expenses. However, when you save for retirement, you will touch the corpus only after you stop earning. With specific goals you will be able to save enough. Right from the start estimate the money you need to achieve each goal and invest accordingly.
When you plan to save early for retirement you can consider investing in mutual funds which are considered as one of the best products owing to the variety of schemes which they offer. Equity mutual funds are ideal for youngsters with a high risk appetite. ULIP or unit-linked insurance plans are good investment choices which combine features of both investment and insurance. Further, investment in ULIP pension plans under section 80 (C ) of Income tax Act is eligible for tax deduction. Finally, NPS or the National Pension System is a retirement scheme which has been initiated by the government.
After the announcement of budget 2016, the news of EPF tax broke out. It had been calculated that if the government imposed tax on the interest accrued on PF contributions, a person at the start of his career could lose close to 18% of his entire retirement savings after the maturity of PF. This was an attempt to nudge the employed towards the National Pension Scheme which has failed to get adequate subscribers. However, on 8th March the government rolled back the controversial proposal to tax EPF withdrawals.
| At a Glance: Pre-Retirement Investment Products |
| New Pension Scheme (NPS) |
| Employee’s Provident Fund (EPF) |
| Equities (equity-related instruments such as stocks and mutual funds) |
| Exchange traded funds (ETF) |
| Bonds |
˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. 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. 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.
Tata AIA
Axis Max Life
Bajaj Allianz
SBI Life
HDFC Life
ICICI Prudential
Bharti AXA Life
Edelweiss Life
Kotak Life
Future Generali
PNB MetLife
Aditya Birla Sun Life
Aviva
Ageas Federal
Bandhan Life
Canara HSBC
IndiaFirst
Pramerica Life
Reliance Life
Sahara Life
Shriram Life
Star Union
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