Rashmi Singh
Retirement Planning’ is the term we all hear at our homes. We have seen our parents start this process of pooling retirement funds from perhaps their early 40s so that they have a peaceful retired life after they are 60. Indian retirement planning usually involves two topics viz,
- Financial Retirement,
- Lifestyle choices.
The former includes how much money has to be invested in the future to lead a secure and satisfied life with your soulmate beside, to comfort one’s thoughts, actions, and everything around, whereas the latter, involves questions like ‘Where to settle down?’, ‘when to quit altogether?’, etc.
Retirement Planning is a topic that should be introduced in regular textbooks and curriculums besides other ordinary subjects to instill the concepts of ‘Wealth Management’ in each student from the time they are young.
The process of retirement planning for different people changes with time, location, and mindset. The retirement planning of an Indian is way too different from the one in Canada or Mexico. This is because of the different laws, systems, and plans offered at different workplaces.
There are different financial plans that retirement can be planned based on, like Mutual Funds, Bonds, Physical Assets, Stocks, Exchange Traded Funds, etc.
What is Retirement Planning?
The whole process of Retirement Planning involves setting income targets and investing diligently in various investment plans to achieve a specific objective before one retires.
If one wants his/her old age to be a bed of roses, making the best memories with their better half, children, and grandchildren, then one has to slog and set desirable financial targets from his early 20s till the fag end of 50s.
Therefore, a meticulous choice of investment plans and investment advisors is very important to have one on the right path to having a secure life.
Why is Retirement Planning important?
Retirement Planning is very significant to ensure the same kind of lifestyle that one lives pre-retirement. Income from the investments made can be used to help oneself and the rest around when in need.
The major importance of planning for a retirement investment is as follows,
- To Address Unforeseen Contingencies
Since the future is filled with major uncertainties like fragile health, demise of better half, emotional imbalance, and deteriorating physical health, only money can help one sustain. With the ballooning medical costs and expenses on medicines, it is important to opt for a meticulous plan that can cover all the uncertain expenditures that might arise for an individual and the spouse.
- To Fight The Galloping Inflation
Inflation is always not going to be the same. The rate of inflation tomorrow is certainly going to be higher than what it is today. Anticipating changes in the economy and lifestyle is not always what an individual can do. When most of the things are out of control, saving for the future alone can be done efficiently.
- Can be your grandchildren’s favorite people
It would be amazing to spend time and money for them by taking them on a vacation and hosting them with good food. Grandparents feel overwhelmed when the kids thank them for a gift. Money should never be an obstacle to getting close to loved ones and making them feel happy.
- Social Investments
It is important to care for needy people around. One can trigger his generous instincts and give away a part of his savings to poor people and enhance their living standards.
To find happiness in retirement and enjoy life to the fullest, money should never be a constraint. For this, financial planning is the most significant step.
Which Retirement planning is the best in India?
With numerous pension plans available in a country like India, it is important to choose what suits an individual and save money in equal intervals so as to ensure a secure post-retirement life. Some of the retirement plans are listed below.
- Max Life Guaranteed Lifetime Income Plan
- SBI Life Saral Retirement Saver Plan
- LIC New Jeevan Shanti Plan
- BajajAllianz Life LongLife Goal
- India FirstLife Guaranteed Annuity Plan
- ABSLI Empower Pension Plan
- Kotak Premier Pension Plan
- Tata AIA Guaranteed Monthly Income Plan
- LIC Jeevan Akshay –VII Plan
The above listed are the retirement investment plans offered by the private sector, there are abundant plans from the government sector too. Some of them are,
- Atal Pension Yojana
- National Pension System
- Pradhan Mantri Vaya Vandana Yojana
- Varishtha Pension Bima Yojana
- Indira Gandhi National Old Age Pension Scheme
A note to consider here is that possessing a varied portfolio of retirement investments is very important to diversify the risks. Senior Citizens Savings Program, Post Office Monthly Savings Program, Debt Funds, and Tax-Free bonds are the best retirement investment portfolios in India.
What Is The Process Of Retirement Planning In India?
Instead of taking big steps overnight. Taking baby steps towards accumulating a retirement corpus is more sensible. Though the process of retirement planning is a cakewalk, following a disciplined approach is a prerequisite. Some of the steps are listed below.
- Determining The Age Of Retirement
Though the most common age of retirement is 60, most of them wish to retire early. On the other hand, most of the workaholics work after retirement. So getting to know the time frame and acting accordingly is very important. Also, based on medical history, it is important to anticipate the age till which one might live, not considering they one might die in a fatality.
- Early Start For a Blissful Retirement
To not compromise on goals and have a smooth retirement, it is important to start off early. The early 20s till early 30s is the right time to think about building a retirement corpus. Some of the steps an individual should follow at this age are to Estimate a rough figure for retirement, Build a contingency fund, Take a Health Insurance policy, Regular investments, etc.
- Calculate What An Individual Today’s investment would be Tomorrow.
Understanding how the economy works is important to accomplish this step. The best way to save is to earmark a certain percentage of the earnings towards retirement and left undisturbed. To know this, one should understand what a Rate Of Return is and learn to obtain the figures.
- Having A Watch On the Expenditure
An individual should learn to cut down on one’s unnecessary expenditures and be meticulous in accomplishing financial objectives.
Seek Advice From A Financial Planner
Since retirement planning is an exhaustive and elaborate exercise, is it important to seek professional help. They will help an individual with the allocation of funds, streamlining investements and checking their relevance with regards to the current market.
Retirement Planning With Mutual Funds
Like how you think the love you show to people should be reciprocated back to you, the investment you make should give satisfactory returns. Return On Investment is the most important feature of the entire process of wealth creation.
Mutual Funds are a form of retirement investment plan that exposes an individual to various assets and sub-asset classes. Prior data show that MFs are preferred by most senior citizens as a potential investment plan.
If an individual had planned an investment where he had parked money in NIFTY 50 TRI through SIP, there would have been a CAGR of 10.3% and a corpus of 2.7 crores with a monthly investment of 1.2 lakhs.
Retirement Planning Calculator In India
Calculating Retirement corpus has become a part and parcel of all people. Of late with a dynamic working environment and the business cycle, meticulous calculation of finance is very important.
So of the benefits of learning the art of Calculating Retirement Planning are listed below
- Offers an overview of one’s financial condition
- Comparison can be drawn between different choices available in the market
Using a financial calculator in India doesn’t require much of one’s time and knowledge. If inputs are given, figures that have to be saved will automatically show up.
Best Pension Plan In India
With a plethora of Retirement plans available in India, one might get confused about where to invest. At the same time, it is important to know where not to invest so as to not messing up the plan. Some of the best retirement plans in India are as follows
- Aditya Birla Sunlife Empower Pension Plan
- Aegon Life Guaranteed Plan
- Aviva Next Innings Pension Plan
- Bajaj Life Long Goal Pension Scheme
- Canara HSBC Invest 4G Whole Life
- Edelweiss Tokio Life- Wealth Ultima
Most of them at this stage get doubt whether they will get the same interest rate that they are assured of, by the above-mentioned plans. Here comes a major turning-point-Section 80ccc.
What is Section 80 CCC?
This section comes under the Income Tax Act of 1961. It provides exemptions of up to 1.5 lacs pa for the amount of contribution that an individual makes towards a particular pension plan.
The Terms and conditions one must follow to avail of the benefit are:
- A bonus received is not eligible for exemption under Section 80CCC
- An amount parked before April 2016 is not eligible
- Monthly Pension one gets from the policy is to be taxed
- Any rebates on investment in plans before April 2006 are not allowed
Why is Financial planning important?
Financial Planning is one of the most important aspects in a person’s life to see only smiles around and wink at sorrows and grief on your way. Financial planning is a subject that has to be incorporated into school and university syllabi to bring awareness among the millennials and have a safe journey and make happy memories with their family.
Financial Planning is the most important step to ensure there is a healthy cash flow at home without unnecessary expenditures, better investment planning, continuous rate of interest from the investment portfolio, guarded against the shackles of running inflation, etc.
Financial planning and financial literacy are like two edges of a sword. A sword would be of no use if one of the two is missing. Likewise, life will get useless and filled with tears and pain if the two are not done efficiently. When there’s only one life to live, why fret about learning this absolutely enjoyable art of financial planning?
Also Read| Budget 2023: Expect standard deduction and 80C limit increases
FAQs
- What is retirement planning?
Retirement planning is an important step in financial planning that helps one achieve long-term financial targets so as to lead a peaceful retirement life.
- What are the different types of retirement plans available in India?
- Atal Pension Yojana
- National Pension System
- Pradhan Mantri Vaya Vandana Yojana
- Varishtha Pension Bheema Yojana
- Indira Gandhi National Old Age Pension Scheme
While the above are the government-offered retirement plans for senior citizens,
- Max Life Guaranteed Lifetime Income Plan
- SBI Life Saral Retirement Saver Plan
- LIC New Jeevan Shanti Plan
- BajajAllianz Life LongLife Goal
- India FirstLife Guaranteed Annuity Plan
- ABSLI Empower Pension Plan
- Kotak Premier Pension Plan
- Tata AIA Guaranteed Monthly Income Plan
- LIC Jeevan Akshay –VII Plan
These are the private Retirement plans available with private players in the market.
- Why is financial planning important?
Financial planning is an art everybody has to learn to ensure the adequacy of funds, healthy investment, to cover against uncertain events, and ensure financial growth in a family.
