My Tax & Diary

Retirement

Retirement is not something that just happens to other people - all of us will experience it at some point in time in life. However, not all of us can confidently say that we are well prepared for it. As a private sector employee or self employed person you will have to support yourself at the time of retirement because the government will not going to help you And, unless you work as government employee who gets monthly pension & gratuity and provident fund on retirement.

There is a high possibility that many of us might be under-funded to finance our own retirements. Even if you are young and retirement could be 30 years away for you, now is the best time to start thinking about your retirement.

Stocks aren't depreciate always and bonds are safe but return is not at par the money power depreciate. Therefore with good ideas and regular savvy tactics, you can still achieve your retirement goals.

What does retirement mean?

It means that you will no longer be actively working or earning any salary income. As a result, you need to live off the savings that you would have made during the peak of your income earning years. During your retired years, you depend on this pool of capital you have created in your actively working years

Advantages of retirement planning

  1. Avoiding a dramatic hit to your lifestyle post retirement
  2. Most of the retirement investment plans offer you significant tax benefits.
  3. Providing financial protection to your dependents.

The best time to start planning for retirement

The mantra is to start retirement planning at an early age. Because our earnings capacity will deplete as we age. So, its best to take advantage of our earnings capacity today to protect our future when we are not actively earning.

The best planning for retirement is to start investment in pension plans - understand why to invest in pension plans ?

Pension plans are offered by insurance companies to help individuals build a retirement corpus. On maturity this corpus is invested for generating a regular income stream, which is referred to as pension or annuity. Pension plans are distinct from life insurance plans, which are taken to cover risk in case of an unfortunate event. Therefore pension plans are being considered the best retirement planning.

Points to consider for the action planning

Estimate your retirement benefit would be

Your benefit payment is based on how much you earned during your working career. Higher lifetime earnings result in higher benefits. If there were some years when you did not work or had low earnings, your benefit amount may be lower than if you had worked steadily. Your benefit payment also is affected by the age at which you decide to retire. If you retire at age 6o (the earliest possible retirement age for Social Security), your benefit will be lower than if you wait until later to retire.

Action Time of Planning

The service class Indian people are more concerned about their retirement planning than other country men whereas most of US citizens do not plan for retirement and enter their retired life with little or no wealth. However, it is very important to every one to begin retirement planning early.

What would be taken into account for Retirement planning ?

Tips for sensible retirement dream planning

We list for you 8 easy ways you can rethink before action for retirement planning.

Step 1: Get serious, start early
Never delay in planning for retirement. Start as early as possible. Make a list of your financial goals and what you own so you recognise the gap between the reality and your dreams.

Step 2: Load Up on Life Insurance
Must be thought twice that any uneventful situation may arise in the life.

Step 3: Consider a plan
Assess your incomes and expenditure, and make provisions. For example, set aside some money for travel and medical expenditure post retirement. Make a list of things you own and those that you wish to own e.g. a car or house.

Step 4: Consult a financial advisor
If you are not in a position to make a workable plan, consult a financial advisor who will help you develop one.

Step 5: Readjust Your Portfolio
It is advisable to decrease equity exposure, and increase your investments in debt and fixed income instruments. Your financial plan needs to be monitored at regular intervals to make sure you are on target to meet your objectives.

Step 7: Consider a Flexible Retirement Job & Don't dip into your retirement savings
If you spend money from your retirement kitty to fulfill your present needs, you will lose out big in the long run. The corpus for your retirement will be that much lower. Also consider a flexible retirement job.

Types of Pension Plans

'With cover' and 'without cover' plans

Pension plans are also classified as 'with cover' and without cover' plans. The 'with cover' pension plans offer an assured life cover (i.e. sum assured) in case of an eventuality.

Under the 'without cover' pension plan, the corpus built till date (net of deductions like expenses and premiums unpaid) is given out to the nominee in case of an eventuality. There is no sum assured in this case.

'Immediate annuity' plans and 'Deferred annuity' plans

Pension plans are also classified as 'immediate annuity' plans and 'deferred annuity' plans. In case of immediate annuity plans, the annuity / pension commences within one year of having paid the premium (which is usually a one-time premium).

The premium paid for the immediate annuity policy is also known as the purchase price. Currently in India [Images], very few life insurance companies offer immediate annuity plans. LIC's Jeevan Akshay II is an example of an immediate annuity pension plan.

In case of deferred annuity, the annuity/pension does not commence immediately; it is 'deferred' up to a time, which is decided upon by the policy holder. For example, if an individual buys a pension plan with tenure of 30 years (also known as the 'deferment period'), then his annuity will begin 30 years hence.

Deferred annuity premiums can be paid as a 'single premium' or as regular premium. Presently, most pension plans available are deferred annuity plans.

Difference between conventional life insurance plans and pension plans

There are some fundamental differences between life insurance plans and pension plans, with the objective behind both of them, being the most important. Life insurance plans aim at covering the risk from an unfortunate event. Pension plans on the other hand work on the opposite scenario that if an individual survives beyond an age (retirement age), he will need to provide for himself.

The difference in objectives is the main reason for the differences in the features of life insurance and pension plans.

The number of companies are offering many pension plans with some specific features and benefits. In India New Pension System (NPS) is introduces recently. click for more details

Overcoming Retirement Depression

Take retirement as retire from work not from life You can overcome your retirement depression without seeing a doctor or taking an anti-depressant drug. Here are some tips for overcoming your retirement depression:

HAPPY RETIREMENT !!

Planning for your retirement is not a difficult task. The challenge lies in implementing the plan with discipline.









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