RETIREMENT’S SHIFT: DIFFERENT STAGES FOR DIFFERENT AGES

He UK population is ageing. Data published by the ONS in 2015 show that the UK population of over 65s has grown by 47% in the last forty years to make up nearly 18% of the total. And the number of people aged 75 and over has increased by 89% in the same time period. The most common age at death was 86 for men and 89 for women in 2011–2013.

Assuming retirement is taken at 65, the average retiree has 18 to 20 years ahead of them. During this time they may go from good health to poor, or from complete independence to full time care. Exactly what will happen over the next two decades is uncertain. However, their retirement is unlikely to remain static and will be comprised of different phases, reflecting this time of great change in their life.

A dynamic retirement model

Today’s typical retirement may be broken down into four distinct stages:

Pre-retirement. Retirees may ease themselves into retirement by working reduced hours at their current job. Depending upon individual circumstances, they may cut back their hours in their early to mid-60s. Retirement Insurance Company continues to contribute towards their pension and pay for life cover.

Bucket-list years. At about 68 years old, people leave their employment to do all the things that were difficult when they were working. Travel is likely to rank highly amongst their plans; 82% of over-60s cited travel as a goal in early retirement.* Their lifestyle may be quite expensive and they’ll need a lump sum to fund significant purchases.

Traditional retirement. At about 73, the retiree starts to slow down and her lifestyle starts to resemble the classic ‘pensioner’. This group is unlikely to work, but will take part in leisure activities. Living expenses will be lower than in the previous phase.

Care years. Later on, from about 82 years onward, the likelihood of poor health and loss of independence increases, and the retiree may need full or part-time care; in 2009, over two-thirds of people over 85 had a disability or longstanding illness*. Living expenses will be modest, but care expenses could be high, with uncertainty over how long remaining funds will have to last.

Retirement is no longer a single life event with a one-time decision on how to use accumulated funds at 65 years old. Rather, it can be viewed as a set of discrete retirements, with each phase demanding its own level of income.

Meeting the needs of today’s retiree

The freedom of choice now available to those at retirement age has left many people with access to considerable capital – but they’re unsure what to do with it.

At Sapiens, we believe that an open-minded view of a modern, dynamic retirement presents an opportunity for providers to step up and deliver much-needed support to retirees. Those providers who have developed a portfolio of products to meet clients’ changing financial needs will have an advantage. In addition, those who have a policy administration system that allows for product flexibility and rapid new product generation will be in the best position to meet the high expectations of today’s retiree.

Want to know more?

Sapiens International Corporation (NASDAQ and TASE: SPNS) is a leading global provider of software solutions for the insurance industry. Sapiens ALIS is our flagship solution designed to enable insurance providers to quickly and efficiently address the challenges of a highly regulated and increasingly competitive marketplace. Contact me for more information.

Source: http://blog.sapiens.com/ages-and-stages-retirements-shift-to-multi/

How would you like to spend your retired fund?

Some people retirement is the most awaited time of their life, while others want to run away from it. So whether we hate it or love it, there will be a time when will retire from active life. Like everything else in this world there are both good things and bad things about retirement. Retirement planning is all about being prepared to make the most of good things that retired life gives to us and be able to deal with what you dislike about retirement. I would say the key to a happy and enjoyable retirement phase is to take advantage of the opportunity that retired life presents.

While we are young and working we are loaded with all the responsibilities right from earning a livelihood for the family to maintaining a good relationship with friends and relatives. But once we are retired we all have bounty of leisure time which we can spend the way we want. But remember you also need to ensure that you are not constrained for any reason especially monetary ones. Financial hurdles can really take a toll on your retired life and make you feel lost and unwanted.

So it is best that you know how you would like to spend your retired life and invest in a Retirement Fund timely to accumulate the required corpus. Retirement age gives you all the time to do all what you regretted missing because of lack of leisure time. So here is a list of some activities that you can plan for your retired life.

Enjoy a Blissful Sleep – This is something most of us miss because of our work responsibilities but retirement is a time when you can look forward to having a blissful sleep without being worried about being missing any of your responsibilities.

Enjoy Socializing - Job and family responsibilities never gave us enough time to spend time with friends and relatives. But when you are retired make sure you do not miss out sharing a hearty laughter with your near and dear ones. It is not only a good past time but will also help you keep good health.

Some Gardening and Morning walk - Being close to nature helps you maintain a good mood and health. Plan for a morning walk but please do not be stressed if you miss out on a morning walk because you didn’t feel like waking up. Gardening is a great mood booster and it will help you relax and enjoy the rest of your activities better.

Watching Television - The favorites TV shows, movies and cricket match which you always missed do make it a point to spare some time for these. But as you would advise your grandchildren avoid too much of it.

Playing with Grandchildren – This one comes as a responsibility and leisure activity both. But if you plan a few hours for the same during the week it can be great fun and exercise too. You may even talk your grandchildren out for some shopping or to a gaming zone.

Home Improvements - If you are one of those creative persons but your routine killed your enthusiasm earlier, reaching retirement age offers plethora of opportunities. With plenty of time in your hands you can plan for some home improvements that not only give you creative satisfaction but also improve the beauty of your home.

Knitting Sweaters for your grandchildren – For those who know knitting it is indeed a great past time. It keeps you mind agile, helps you spend hours together without even realizing it. And when you gift those sweaters to your lovely grandchildren and see them wearing and moving around, there is nothing that will give you as much pleasure and satisfaction.

Source: http://www.easypolicy.com/KnowInsurance-A/how-would-you-like-to-spend-your-retired-life-

Compare and Buy the Best Retirement Plans

Pension plans also known as retirement plans are investment plans that lets you allocate a part of your savings to accumulate over a period of time and provide you with steady income after retirement.  Even if a person has a good amount of savings, a retirement plan is nevertheless crucial. Savings get exhausted very fast and are sometimes used in emergencies, so selecting the best retirement plan helps you secure your cash flow for meeting basic daily needs post retirement. When you continuously invest in retirement plans, the amount grows manifold due to the compounding effect which makes a lot of difference to your final savings corpus. A right pension plan lets you plan for retirement in a phased manner. So it is advisable to choose a best retirement plan that can act as a savior in your golden years.

 Features of Pension Plans

Nowadays, people start planning for the retirement life at an early stage so that at a later stage they do not have to depend on others to make their ends meet. Usually, a conventional retirement plan encompasses following features-

 1. Minimum Guarantee:

Every pension plan needs to have a minimum guarantee. As per IRDA guidelines, there should be "on-zero returns" on all premiums or guaranteed maturity benefits. Most insurance companies guarantee a minimum of one percent of total premium over the complete policy term.

 2. Tax Benefits: The final payout is provided in two ways. 33% of final pay out can be withdrawn in lump sum and is not taxable. However the rest of the amount is taxable.

 Types of Retirement Plans

 A retirement plan is a crucial investment, considering the prevailing inflation rate. Retirement plans vary in terms of their benefits and structure. Broadly, these plans can be further divided under below heads-

Deferred Annuity: A deferred annuity plan allows you to accumulate a corpus through regular premiums or single premium over a policy term. After the policy term is over, pension will begin. The advantages of deferred annuity plans are immense and these include tax benefits that are associated with this plan. No tax is levied on the money that an individual invests in the plan unless he withdraws it. As deferred annuity plan can be bought by making one-time payment or by making regular contributions towards it, therefore, the plan suits to all types of investors: those who want to invest systematically and those who have a chunk of money to invest.

 Immediate Annuity: In an immediate annuity plan, pension begins immediately. One has to deposit a lump sum amount and pension will start instantly Based on the lump-sum amount, the policyholder will invest at prevailing annuity rates. You can choose your annuity from different annuity payout options. Moreover, you can enjoy tax benefits on the premiums paid as per Indian Income Tax Rules. After the death of a policyholder, his nominee will be entitled to get money.

With Cover and Without Cover Pension Plans: The "with cover" pension plans have life cover component in the plan. This implies that on the death of the policyholder, a lump sum amount is paid to the family members. However, the cover amount is not very high since a large part of premium is diverted towards growing the corpus rather than covering for life risk. The "without cover" pension plan implies that there is no life cover. The corpus built till date (after deducting unpaid premium and other expenses) is given out to the nominee in case of the death of a policyholder. Presently, deferred annuity plans are "with cover" and immediate annuity plans are "without cover".

 Annuity Certain: As per this clause, annuity is paid to the annuitant for specific number of years. The annuitant can choose the period and if he dies before exhausting all payments, annuity will be paid to beneficiary.

 Guaranteed Period Annuity: As per this annuity option, annuity is given to the life assured for certain periods like 5,10,15 or 20 years, whether or not he survives that duration.

 Life Annuity: As per this annuity option, pension amount will be paid to the annuitant until death. If annuitant chooses "with spouse" option, after the death of annuitant, pension will be paid to the spouse.

 National Pension Scheme (NPS): New Pension scheme has been introduced by the government for people looking to build up pension amount. You can put savings in new pension scheme which will be invested in equity and debt market as per your preference. You can withdraw 60% of amount at retirement and rest 40% must be used to purchase annuity. The maturity amount is not tax free.

 Pension Funds: Owing to the low front load charges, pension funds are a good way to accumulate corpus amount. Pension funds are meant for long term and hence, they perform better. Pension Fund Regulatory and Development Authority (PFRDA), the government body has allowed 6 companies as fund managers

Source: http://www.policybazaar.com/life-insurance/pension-plans/#ixzz3tQWASPv7

Retirement Pension Plans

Retirement Pension Plan

Retirement/Pension Plans are savings and investment plans that provide income after retirement. These plans help to build a retirement corpus which is invested on maturity to generate a regular stream of monthly income to cover policyholder’s expenses. Pension plans provide financial security to policyholders during their retirement days to live their life with pride and so it’s important to choose a pension plan carefully.

Pension Plans are individual insurance plans that impact policyholder’s future by providing financial stability during old age. Pension plans are suitable not only senior citizens, but anyone planning for a secure future. With an increasing number of young Indian professionals who are working in the private companies and moving away from traditional joint family structure, parents are required to plan carefully for their retirement years. Given the high cost of living and rising inflation, employer pensions alone are not sufficient. Pension planning has therefore become critical today. Life spans have been increasing due to better health and sanitation conditions across the world. However, the average number of years of employment has not been rising commensurately. The result is an increase in the number of post-retirement years.

To lead a secured retired life one needs to plan for his or her Retirement Pension Plan from very early in their life. Small investments made early in the life can help in getting a regular retirement income which enables you to lead your life with the same lifestyle even after retirement. Saving in such plans also has tax benefits. The amount of investment in a pension plan shall depend on how much monthly income do you require in our post retirement years.

Pension plans are offering a comprehensive long term financial plan for retirement years. We should have to compare various plans available in the market, in terms of costs and benefits from the data available on companies’ websites to choose the best plan.

Documents required to get a pension plan are as follows:

Age Proof, Identity Proof, Address Proof, Income Proof, Duly Filled Proposal Form

So, take a Pension Plan and secure your future.

Source: http://priyankablogthoughts.com/retirement-pension-plans/pension-plan-2/

Planning for retirement? Is Rs 1 crore sufficient?

Planning for retirement is desirable and thanks to the increasing awareness levels, more and more people are getting conscious of this aspect early on in their lives.

But what raises concern is that most people are not making plans which are realistic. Here is a case in point.

Rakesh Mehra is a well-paid finance manager at a management consulting firm in Noida. He earns Rs 10 lakh a year, and saves at least 20 per cent of it.

He finds that his annual expenditure is close to Rs 7 lakh. That means, in order to save for retirement, he needs to have a corpus of around Rs 80 lakh so that even if he gets 10 per cent interest from bank fixed deposit, it brings him a cool Rs 8 lakh a year.

Do you think that he is treading on the right path? No, not at all. Wondering, why?

Well, planning for retirement should be done on future requirements and cash flow, and not present. Inflation is the biggest culprit which can spoil all of your plans, quietly and surely.

If you are 30 years of age today and your story is similar as Rakesh, then you have to think again. After 30 years, that means when you achieve the age of 60 years, your expenses will be 10 times than present.

That too when we take into account an average rate of inflation at 7-8 per cent a year. This is the best case scenario. If prices and cost of living go up with greater pace, then you require much more.

Needless to mention that your expenses will increase in future considering requirements of your children and your family. You have to essentially think about education, marriage, health among other things.

Therefore if you are planning for a corpus of Rs 80 lakh at the retirement age of 60 years, do factor in inflation.

Try to save more and to the extent that you set aside at least 10-15 per cent of your income into pension plans.

Many people also prefer to invest in real estate and gold, in order to earn handsome returns and rule out perils of inflation. It is a good strategy but at the same time, do not rely on 1-2 types of asset classes.

Diversify your risks so that you do not get stuck at a critical stage. Remember that real estate is a highly illiquid asset class and you may not be able to sell it instantly in case of an exigency. Gold is still better in this case.

Financial instruments are much more flexible and can be liquidate over a period of time. The lock-in period is for the initial 3-5 years, and after that you get options to take an exit route at your discretion.

These days, the finance and insurance industry in India is bringing a host of magnificent plans which can help you achieve your retirement goals easily and in a much better way.

Insurance companies such as HDFC, Kotak and Reliance have introduced retirement plans which offer guaranteed returns after a certain period of time. Plus there are several other benefits such as life insurance coverage, disability benefit, so on and so forth.

So, just do not get nervous. There are ways through which you can plan for your retirement without hassles. So, what are you waiting for? Just key in a few details about yourself and start comparing the best possible plans available in the market at a click of a button. Happy investing!

Source:  http://www.policyx.com/blogs/planning-for-retirement-is-rs-1-crore-sufficient/

Invest your Retirement Fund

One of the key goals of working individuals is to have “peace of mind” when they retire.  The thought of knowing that all your years of hard work will allow you to comfortably enjoy your golden years is certainly an exciting and rewarding one.  As a result, there has been an increase in the demand for new and unique information on how your retirement funds can work for you safely and legally.  Thus many options have been examined and re-examined to provide the best information for you.

Moving and investing your 401k or IRA offshore is fairly new, as it wasn’t until recently that many realized that the USA Tax Law actually made allowances for this type of investment.  For many years, available investment options for retirement funds have been limited or so it was made to seem. In the past, many would highly depend on companies that offer retirement plan investment, to invest your retirement funds prudently for gain.  However many times this was done at a minimum or not done at all.  In fact, many of the funds were not invested but were still accruing high fees and commissions to the benefit of the company and not the individual.

Research shows that only about 20% of retirement account holders are familiar with the self directed IRA concept. This simply means that you are allowed to direct the investments of your retirement fund account instead of depending on another company to manage your funds. The good news is that once the self directed IRA is set up, you make all decisions and ultimately take charge of your own retirement fund ensuring that it’s invested prudently for maximized profits. After all, it really doesn’t matter if you are close to retirement or years away from it, planning for a decent future involves a great game plan.

How Self Directed IRA’s work

Creating and maintaining a self directed IRA is an easy and straightforward process. A trustee or custodian will hold all your IRA assets on your behalf.  However, before this can be done an account must be opened with a trust company or a brokerage firm who offers self directed IRA services. Most custodians already have existing relationships with brokerage firms and as such setting up a brokerage account on your behalf is not a tedious process. The accounts are held as an asset within your self directed IRA account.

Once completed the share certificate will read as follows “123 Trust Company”, custodian for “your name”, IRA, Account No.— . This is the distinction and identifier for this product, it allows the brokerage account to be a part of the self directed IRA client account.  After completing this process you are ready to establish a banking relationship with any offshore financial institution, of your choice, to be able to purchase different types of investments.  One of the major advantages is that your assets or profits earned from investments are not taxed.  All Taxes are delayed until after retirement.

Benefits

A Self Directed IRA is created to provide you with numerous amounts of flexibility and control to make your retirement funds work for you. Here are some of its benefits

1. Easy to establish

2. The individual is in full control and is the only decision making body

3. There are more investment options, it gives you the ability to choose from a wide array of investment opportunities

4. Favorable tax benefits

5. Ability to purchase assets outside of the equity market

Over time US citizens have been told that maintaining any sort of activity offshore is illegal and unacceptable.  Thus moving your primary retirement fund to an offshore institution has been very uncommon until more recently.  Those that understand the process and benefits of this move have been increasing their retirement funds in an environment that is both legal and one that requires no changes to your tax benefits.

Source: http://www.atlanticibl.com/blog/invest-your-retirement-fun

What is a Retirement Pension Plan?

A pension plan is a financial arrangement that allows individuals to continue receiving some type of regular income even after they are no longer active in the workforce. Pensions are often used as retirement plans, although it is also possible to receive a pension based on disability or other circumstances. One of the characteristics that is common to a pension plan is the fact that income payments are disbursed to the recipient over a period of time, usually in a series of equal monthly installments.

The concept of a pension plan is found in many different countries. In the United States, the terms retirement plan and pension plan are used interchangeably, even though a pension does not necessarily have to be connected with retirement. In like manner, the same type of financial arrangement is usually referred to as a pension scheme in the United Kingdom and some parts of Europe, while the plan is known as a superannuation in a number of other countries.

The pension plan should not be confused with a severance package. With severance benefits, the individual usually receives some type of lump sum settlement that is subject to taxes immediately. By contrast, a pension account is built up over a number of years, often with no interest incurred while the plan is being funded. At the time disbursements from the pension commence, the recipient pays taxes on all payments received during the tax year, but not on the balance remaining in the plan.

Plans of this type may be offered through an employer or as part of the benefits offered by a government. Employer-based pensions tend to involve contributions made by both the employee and the employer over a number of years. When the employee retires from the company, monthly installment payments are made from the pension fund to the retiree, creating a steady flow of income for use during the retirement years.

Governments also sometimes create and maintain a pension plan program for its citizens. With this model, deductions from wages and salary over the years are credited to the pension account of the taxpayer. Upon reaching what is considered a legal retirement age, the individual can apply for and begin receiving monthly installment payments, with the amount of the payments based on the income level of the individual over his or her working life. In the United States, this type of pension plan is operated by the Social Security Administration.

A disability pension plan is also a means of supplying income to individuals who are not physically or mentally able to function in the workplace. This provision may be included in an employer-based Retirement Pension Plan as well as part of a government-operated pension scheme. In both situations, if the individual is deemed by qualified medical professionals to be disabled and thus unable to work, the disability pension activates and supplies the individual with a source of income.

Source : http://www.wisegeek.com/what-is-a-pension-plan.htm

What will Retirement cost me?

Conventional financial planning suggests taking your current expense levels and inflating them by the prevailing consumer price index, to arrive at expected expenses post retirement.

There is more to estimating your expenses at retirement than just simply inflating your current expenses at the Consumer Price Index.

Conventional financial planning suggests taking your current expense levels and inflating them by the prevailing consumer price index, to arrive at expected expenses post retirement. The next step is to then arrive at a corpus or sum of money that you need to put aside that will provide for the given expenses. However, the Big Decisions inflation index as shown in the table below, shows the more likely expected inflation levels in a given age band.

Our index indicates a lower than conventionally expected inflation of expenses for retirement and, therefore, a lower amount of savings and investments will help the family's primary income earner to meet the goal.

Let's see how the two approaches differ for a 35 year old man who is the main income earner of a family of four people, expecting to retire at the age of 60 and whose current family expenses, including an EMI for their home is Rs 75,000 per month.

Conventional Retirement Plan Company would suggest that the family's expenses would inflate @7% a year for the next 25 years, resulting in their expenses becoming a little over Rs 4,00,000. Even if the family expects to earn a post-tax return of 8%, the primary income earner will need to plan to build a corpus of over Rs 9 crore, requiring him to save more than Rs 90,000 per month.

Taking the BigDecisions.com index into account, the family can expect expenses to inflate only at 3.5% per annum for the next 25 years, resulting in the family's expenses being under Rs 2 lakhs per month. To prepare for this, the family will need a corpus of under Rs 4.5 crore and a monthly saving of less than Rs 45,000 per month.

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The methodology used to compute this index was to look at 20 years of daily expense data of a given household,remove one-time expenses to arrive at how increase due to inflation, combined with reductions in consumption, impact the effective inflation rate for a household. These results are meant to be indicative and may vary across different households.

[Source: https://www.tomorrowmakers.com/articles/retirement/what-will-retirement-cost-me]

5 Things to never do after you Retire

Here are unpleasant surprises to avoid in your golden years, when you are looking forward to enjoying life. Starting to save later, neglecting your health among other things, can lead to some nasty surprises once you get there.

Avoid these nasty surprises:

1. If you need to get yourself a dream home or a car, banks will queue up to lend to you. Education loans for your children are also fairly easy to get. But no one will lend to you, to lead a comfortable retired life unless you are willing to reverse mortgage your house.
   
   So realizing that you do not have enough after you have retired is a problem to say the least! Some estimates say that Rs 1 crore to Rs 5 crores is required. It’s not a one-size fits all kind of situation. Sit down with a financial planner and figure out what you will need to save without letting these numbers intimidate you.
    
2. On the flip-side, unlike most other goals mentioned above, you have a greater influence on how much you need or what things cost. So, how much your children’s education is going to cost you, is much more in the institute’s (the one he/she decides to go to) control than in yours. Likewise, for your house, the real estate market is not in your control. We are not suggesting that you adopt a ‘chalta hai’ attitude but rather that you keep things in perspective.
   
   However, your future expenses do not inflate as several estimates might suggest. Some things like family size, daily commute and leisure plans can change your consumption of several items. In a way, future inflation gets balanced with your altered, more toned down lifestyle.  So, stop worrying too much about inflation, and get started saving for retirement right away, with however little per month as you can manage.
    
3. Retirement is the worst time to start taking your health seriously. Healthy eating and exercise habits go a long way in reducing your expenses as you grow older. Conversely, healthcare costs (especially given recent inflationary trends in this area) can dig a huge hole in your savings, if you don’t have adequate health insurance (see how much you should have here).
   
   Health insurance is too expensive if you decide to buy only after you retire. Taking your health seriously right away, is the best decision you will ever take. Not relying on your employer (since they won’t be there for you after you have retired anyway) is a very distant ‘next best’ option!

 

It is also not the right time to churn your portfolio and Retirement Insurance Policy in a more aggressive manner. If anything, this should have been done years before you retire. Later you should be more conservative with your money. Playing the stock market at this stage of your life, will leave you with no buffer if you lose money, as you no longer have a steady income coming in.

4. Don’t co-sign loans or put up your savings/investments/property as collateral for anyone. 

Do these things well in time and protect yourself, and you are all set to enjoy your retirement years in a carefree manner.

[Source: https://www.tomorrowmakers.com/articles/retirement/5-things-to-never-do-after-you-retire]

Start Early to Retire Rich

Starting early and sticking with a disciplined saving habit is perhaps the only way to tide over the huge problem of unfunded retirement that most Indians are likely to face in their twilight years.

While the world has slowly come to terms with the damage caused by the sub-prime crisis, many financial analysts are now warning that even greater economic threat is looming – the massive shortfall in funding for workers’ retirement. Sample this: In the US, consumers and government organizations would need to add $6.6 trillion to their existing funds to allow pensioners to maintain their standard of living.

A report commissioned by the European Central Bank states that across 19 of the EU nations, state-funded pension obligations total approximately $37 trillion, about five times more than their combined gross debt. It will be much more difficult for Indians, as a large majority is not touched by any kind of pension scheme. The previous generation had to save for retirement but the current generation will have to invest for a comfortable post-retirement life. Given the fact that Indians are living longer, 75 and above, coupled with high inflation, the need for retirement planning is increasing at a fast pace.

In India, families are becoming smaller and due to geographical labour mobility, children are increasingly likely to be separated from their parents. Changing social values have made the joint family unattractive for the urban younger generation. Most likely, this is only going to get worse. This means, those who are now in their 30s and 40s need to take retirement planning as the most important goal and start working towards it before it is too late. Gone are the days when one could completely bank on their children to take care of them.

Earlier, public provident fund (PPF) and fixed deposits along with post office savings were considered the smartest way to save towards Retirement Plan Company. Times have changed now. With increasing consumption demand, the prices are shooting through the roof. This leads to the question: Is it possible to retire rich and if yes, how? Many couples, when they meet a financial planner for the first time, get excited when they are told that a Rs 10,000 monthly SIP in an equity fund can grow to Rs one crore in 20 years’ time at a 12% annualized return. The excitement soon vanishes when they are told that given their current expenses, it’s only one-fourth of what they would actually require.

It is not difficult to retire rich, provided one starts early. Though investment planning is a complex process, especially planning for retirement, disciplined investments done for a long time will ensure you are able to sail through comfortably. There are many other options, which one can explore alongside investing in mutual funds, such as pension schemes, in stocks, and investing in hybrid products. Keeping it simple is the mantra along with making cosmetic changes from time to time, based on change in income and various life stages.

You may get yourself in an extremely difficult situation if you depend on your children for your post-retirement life, and they neglect you when you need them most.

[Source: https://www.tomorrowmakers.com/articles/retirement/start-early-to-retire-rich]

Why do in I need retirement planning?

Retirement is long way off, why should I start planning now…

When your life lies ahead of you with miles to go and milestones to cross, retirement remains a distant speck and is usually the last thing on your mind. You probably think its ok to push the decision for later. But unlike other goals like housing, your child’s education and marriage that can be met by borrowing, retirement expenses cannot.

Why do you work till you drop all your life because post retirement you wish to live the comfortable life that you always envisaged, lazing in a recliner in Goa and enjoying the breeze blowing through your hair. Unwise planning can sadly put you in a spot. Especially if you realize that you have not saved enough at the brink of the retirement.

Also, there is a Retirement Insurance Company which planning for retirement means planning for as many as 25 to 30 years, which is as long as Sachin’s career. Turning your children to take care of you is not really an option as running two household in not easy. But wait it’s not all the downhill, the key is to start saving early so that you have enough for your golden years.

Start today with small monthly contributions to build up your ideal fund. However, the more you defer it, the more you will need to save every month to build the same fund.

Also, experts may tell you that your expenses will inflate astronomically in your later years. But the truth is that with a reduced family size no daily work commute and a simpler lifestyle, it may not be that bad.

You can heave a sigh of relief now and wipe the sweat off your brow. What you will spend post retirement determines how much you need to save today.

There is more to estimating your expenses at retirement than just simply inflating your current expenses at the Consumer Price Index.

Conventional financial planning suggests taking your current expense levels and inflating them by the prevailing consumer price index, to arrive at expected expenses post retirement. The next step is to then arrive at a corpus or sum of money that you need to put aside that will provide for the given expenses. However, the Big Decisions inflation index as shown in the table below, shows the more likely expected inflation levels in a given age band.

Our index indicates a lower than conventionally expected inflation of expenses for retirement and, therefore, a lower amount of savings and investments will help the family's primary income earner to meet the goal.

Our well-researched tools, blog posts and videos help you navigate this decision.

Retire from your job, not from the lifestyle you always desired and deserve!

[Source: https://www.tomorrowmakers.com/articles/retirement/why-do-in-i-need-retirement planning]

Retirement Income fund- securing future

Retirement income fund means any kind of investment product which is available to every kind of people as a stable means of saving for the near retirement. It is popularly known as RIF and is mainly investments in the form of mutual funds. The different types of mutual funds include large or mid-cap stocks and bonds. The portfolio balancing of RIF is done by allowing monetary gains moderately through orthodox approach, this is done so that the bond retains its values in its process of providing a source of income to the people who have invested in the various RIF.

Understanding RIF

RIFs are very important as they provide stable average growth of different assets of the people which they keep aside for retirement purposes and for this reason these funds are vigorously maintained. One thing people should keep in mind about RIF is that they are not treated specially by the tax department but are treated as normal mutual funds and thus are open to all kind of market risks. Although they are a traditional investment they do not guarantee secured income after retirement. Other than mutual funds there are few other types which pay at regular intervals either on monthly basis or six monthly basis and they require minimum investments.

Types of retirement income funds

There are mainly three types of income funds for retirement. These are as follows:

Target date funds: this type of income fund is designed in two ways. 1. They are designed to help people who have invested for Retirement Pension Plan to get through retirement ages. 2. Another way in which they are designed is such that by investing in a number of mutual funds people retire to profit from these investments. This type of investment yields low income but it gives people appreciation as this type of investment provides good exposure among the beneficial classes.

• Income replacement funds: are also known as reverse target date funds. In this type of income fund the investment company slowly returns the investor’s invested money plus any kind of capital gain before the company investment policy terminates in any particular year. This kind of income funds has both its pros and cons as people can either gain highly from this investment as the income yield is high or can go through major losses as the loss in this type of investment is steep.
• Managed payout funds: this type of income fund investment is a safe bet as it provides monthly income and there is also a scope for growth in investment. Like all over mutual funds, managed payout funds too are subjected to market risk but one advantage of this is during market lows this kind of investment can either cut its payout amount or can return the investor’s capital. An idea can be formed on how much income this type of fund will yield by looking into its yearly yields.

Overview

As retirement income funds are managed by professionals, one does not have to worry about the income distribution strategy, balancing of the income when the market changes or about the allocation of one’s assets. RIFs not only pays a stable amount of return but also keeps up with the rising or falling inflation. The best thing about investing for the future is that people can get lifelong monthly income without giving up hold on their assets.

[Source: http://whenwilliretire.com/retirement-income-fund-securing-future/]

Do variable Annuities Make sense for Retirement saving?

What I would really like is what state government workers get, i.e., a pension that starts sending me monthly checks when I turn 65 years old and adjusts those checks to account for inflation. So far I haven’t found a product like that. Does it truly not exist? If so, it is interesting that Detroit thought that they could provide this to their workers without going bankrupt. If Goldman Sachs and the rest of the Wall Street geniuses can’t figure out how such a product should be priced, why did states and cities think that they could do what the world’s most sophisticated financial services industry could not?

Insurance companies offer annuities, but they start paying immediately and don’t adjust for inflation. I’m 50 now. By the time I am 65 what seemed like a fat annuity check today might be the price of a Diet Coke. (Note to folks who ask why insurance companies can do this without going bankrupt as Detroit did… life insurance companies save money on their insurance policies when human lifespan is extended so they can use those savings to keep paying annuities that they have promised. When General Motors went bankrupt their oldest pensioned worker was 115 years old and GM had no way to benefit financially from people living longer.)

The “variable annuity” is something that I can’t figure out at all and I want a reader to explain it to me. The basic idea of a variable annuity is that you put money into it today and the investment returns compound tax-free until you decide to start taking money out for Retirement Plan Company. Vanguard sells them at what they claim (source) are low fees. It turns out, however, that “low” means at least 0.5 percent per year more than the fee on a corresponding index fund. As the S&P dividend yield right now is 1.9 percent (source) that means that one quarter of the yield is raked off to pay Vanguard and its insurance company partner. This sounds suspiciously like paying taxes on qualified dividends plus the new Obamacare rake. If yields were 10 percent and tax rates on dividends were 40 percent this product would make sense to me. But if all of the benefits of tax deferral accrue to the insurance company and/or Vanguard, why go to the trouble and take the risk that the insurance company (think AIG!) will go bankrupt between now and when you need the retirement income?

Are people still buying variable annuities in this low-yield environment? If so, why?

[Oh yes, if you’re looking for a little humor from the financial services industry, here’s a gem from the Vanguard web site: “Note: The American Taxpayer Relief Act of 2012 (ATRA) raised the top marginal income tax rate to 39.6% and the top capital gains tax rate to 20%.” (Emphasis added)]

[Source: https://blogs.law.harvard.edu/philg/2013/12/22/do-variable-annuities-make-sense-for-retirement-saving/]

Is a Retirement Cheaper than Assisted Living?

There’s a rumor that’s been making the rounds for years – have you heard it? If you spend your retirement on a cruise ship, or as a permanent resident of the Holiday Inn, it’ll be cheaper and provide better service than your average senior living or assisted living facility. That’s what the rumors say, anyway. We’ve done some research of our own, looked at the hard numbers about assisted living costs, and here’s what we’ve found. Learn more.

A Cruise Ship Retirement

It’s important to note that not all types of senior housing are created equal. Life on a cruise ship might compare favorably to expensive dull nursing homes portrayed in popular media, but the reality is quite different, and in fact, luxury senior housing and retirement communities offer many of the same perks that a cruises ships do: entertainment, chances to socialize, and customized senior nutrition, to name just a few. And they aren’t as expensive as you might think.

Nursing homes and memory care, which provide skilled nursing on a 24-hour basis, are the pricier options. But for seniors who don’t need constant care, retirement communities and independent living are far less expensive – and yes, they generally cost less than a hotel or a cruise: sometimes as little as $1,500 a month.

Impractical Realities

The logistics of living permanently on a cruise ship seem more than a little impractical. First of all, you can’t bring more much more than a suit case worth of possessions on a cruise. You can forget about packing your favorite sitting chair or a painting. That issue aside, it’s not as if one could just move on to a cruise ship and live happily ever after. Passengers must disembark when the cruise ends, and make arrangements while the ship is at port.

 Keeping these temporary arrangements month after month would be more than burdensome.

Another consideration is that seniors who move to assisted living facilities and nursing homes require help with activities of daily living such as bathing, toileting, dressing, and grooming. Yes, you may be able to get breakfast in bed on a cruise ship or hotel, but the staff are is not prepared or able to help provide hands-on personal care.

Health Risks for Seniors on Cruise Ships

Furthermore, many seniors have a high-risk of falling because of mobility problems. A cruise ship certainly wouldn’t be the best living environment such a person, as even very large ships can list violently in bad weather.

Cost is not the only factor in making a decision about Retirement Pension Plan for seniors, particularly for those who might want to stay close to family and friends, or who might have care needs requiring skilled nursing. Cecil Adams, author of the newspaper column “The Straight Dope,” points out that “the elderly are going to have a lot more medical issues than cruise ships are set up to handle.” And while there is such a thing as a hotel doctor, they generally don’t live on-site, but rather make potentially costly house calls.

Not only that, hotel doctors and on-board medical personnel likely won’t include geriatric specialists. Cecil points out: “If an emergency arises that they’re not ready for and you can’t wait till the ship reaches the next port, your ambulance ride is almost certainly going to be an airlift, which can be expensive and logistically problematic.” In light of how drastic contagious illnesses can be in a confined environment like a cruise ship – an emergency might be more of likelihood than we care to consider.

Even if it’s not an emergency, health care concerns are still important. If you take another look at Joy Bricker’s story, you’ll note that she had to leave her hotel room once her health began to decline. And hotels and cruise ships aren’t equipped to deal with ongoing dementia care, nor do they offer increasing levels of care, as do facilities that specialize in housing seniors.

[Source: http://www.aplaceformom.com/blog/2013-2-2-cruise-ship-retirement-assisted-living/]

Why Do Retirees Need Deferred Lifetime Annuities?

Deferred lifetime annuities can fill a significant product gap within the retirement market, and only life insurers offer them.

Annuities are a unique product type that promise to provide retirees with an income stream through the later stages of their life.

This is especially important for Australians – now amongst the longest-living people in the world – who face the real risk of outliving their own retirement funding.

A specific type of annuity, called a deferred lifetime annuity, is ideally placed to help people manage the risk of outliving their retirement funding (often referred to as longevity risk).

What is a deferred lifetime annuity? Simply, they are a product that provides an income stream once the person reaches a certain age, say 80 or 85.

But due to regulatory hurdles, deferred lifetime annuities remain too expensive for consumers to be attractive and thus there is virtually no effective market for them in Australia.

Life insurers want to help manage retirement risk

A big regulatory hurdle for life insurers to bring deferred lifetime annuities to market is that they need to provide what is called a ‘minimum surrender value’ (MSV), a form of cash back in certain circumstances.

And retirees would be more attracted to deferred lifetime annuities if they shared the concessional tax treatment enjoyed by other super products with supporting income streams.

The former Labor government had given the green light for deferred lifetime annuities to have the same concessional tax treatment as other super products with supporting income streams as of 1 July 2014.

However about Retirement Pension Plan, the new coalition government has put this on hold, pending a fuller review of tax reforms for the financial services sector.

TAL also argues that overly prescriptive regulations governing how income payments are made need to be lifted to encourage better product development.

Remove regulatory barriers

Instead of only providing for fixed percentages or increases to CPI/inflation, TAL wants regulations to allow links to the share market index or other measures that would expose income streams to potentially higher rates of growth where there’s greater appetite for risk.

If these barriers were removed, the overall cost of deferred lifetime annuities would be considerably less.

TAL is calling for regulatory changes so deferred lifetime annuities can become more attractive and help people manage their retirement risk.

[Source: https://www.tal.com.au/voice-for-life/retirement/why-do-retirees-need-deferred-lifetime-annuities]

Life Insurance for Retirement Can Offer a Big Boost

Many people only view life insurance as a way to take care of final expenses. While that is an important component, life insurance for retirement can also offer major advantages when it comes to planning out your Golden Years.

Two life insurance products used in retirement planning are permanent life insurance (coverage that’s in place your entire life that may build cash value) and annuities (a safe investment alternative that includes guaranteed interest rates, tax deferral and an option to have guaranteed income for life).

Even if you have options through your workplace, there are some definite advantages to permanent life insurance and annuities.

Advantage 1: Tax-free death benefit. While 401(k)s and traditional IRAs provide great incentives to save money, their benefits are taxable. This applies even after death—and estate settlement fees and probate fees can eat away at assets you earmarked for your loved ones.

Life insurance death benefits pass on totally tax-free. Meanwhile, interest and cash accumulations generated from a permanent life insurance policy or annuity are tax-deferred. (This means you can generally postpone paying taxes on the interest until you use the money.)

Advantage 2: Liquidity. Typically, you’re subject to an early withdrawal penalty if you use money from your 401(k) or IRA before age 59 ½. In contrast, you can typically borrow against the cash value of your permanent life insurance policy or annuity without facing a penalty.

Advantage 3: Flexibility. Traditional IRAs, Roth IRAs and 401(k) have annual deposit limits that restrict how much you can contribute each year. IRAs also have income restrictions. Permanent Retirement Pension Plan life policies and annuities can be structured to allow you to deposit as much money as you want, regardless of your income.

Advantage 4: Affordability. It is estimated that 58 million Americans are uninsured or underinsured when it comes to life insurance. Many forgo coverage because they overestimate the price by as much as 300 percent. Life insurance policies come in a wide range of prices to fit any person’s budget.

Advantage 5: Security. In addition to a tax-free guaranteed death benefit, permanent life insurance can also offer a guaranteed cash value. Annuities, which can offer a guaranteed payout for as long as you live, also offer a high degree of security.

Does life insurance for retirement sound like something you could benefit from? If so, contact an insurance professional like an Erie Insurance Agent to learn more.

[Source: https://www.erieinsurance.com/blog/2014/life-insurance-for-retirement]

Perspective on Retirement Planning

Early planning for retirement is imperative in today’s age wherein advancements in medical science have helped increase life expectancy. In addition, a wide choice of career options and a fast paced life has evoked the thought of early retirement in the minds of the younger generation. With increased longevity and the urge to maintain a similar lifestyle in one’s post retirement phase as well, the need for appropriate retirement planning is an imperative.

According to survey conducted in 11 tier 1 and tier 2 cities to understand the current state of financial planning in urban India, consumers are skeptical about the adequacy of their financial plans to meet their desired standard of living throughout their lifetime. In fact, only 13% of youth and women are extremely confident that they have adequate retirement planning in place. Though the Wisdom investor segment (45 years and above) scored better in the level of confidence yet their percentage stood at only 24%.

The study clearly points out that while we postpone a lot of simple joys of life to our retirement period, we do not adequately prepare ourselves during the prime time of our working lives to focus on building a war chest. These joys could range from travelling to cherished destinations to owning much coveted luxury goods or simply indulging in an expensive hobby.

In the absence of a formal social security framework in our country and inadequate statutory retirement funding (by both employers and self), there is a greater need to evaluate in advance the options available for retirement income planning. A clear definition of our retirement needs is the first step towards adequate provisioning for retirement. The answer to this lies in two basic questions – “HOW MUCH MONEY would we need when we retire?” and “WHAT PART OF OUR INCOME should be invested towards building that corpus?”

Having quantified our retirement needs, we need to also look at suitable instruments that are tailor-made to fulfill such needs. Let me talk about two such instruments which are customized towards fulfilling retirement planning goals.

Pension and Annuity

An exclusive category of products offered by Life Insurance companies in India is Retirement Solutions, which is a culmination of two phases – accumulation phase when we build our retirement fund by investing in a Retirement Pension Plan before retirement and redemption phase in the form of regular and guaranteed income for life post retirement through an Annuity plan.

I feel that Pension and Annuity plans should never be looked at in isolation. They are two sides of the same coin. A combination of these two plans is a good investment avenue that takes care of longevity risk, i.e. risk of us outliving our savings.

The key benefits of a Pension and Annuity combo are:

1.        Flexibility to choose the tenure depending on one’s retirement age

2.        Hassle free transaction giving the process an OTC feel (online options available)

3.        Advantages of tax efficiency under sec 80 CCC and 10(10A) of the Income Tax Act 1961

4.       Derisking from market volatility once Annuity is purchased

5.        Benefit from the power of compounding commences early

6.       Ensuring by virtue of regulations that funds for retirement are actually utilized accordingly

7.        Wide range of Annuity options to choose from (including Return of Premium) and ability to customize features like payment modes etc. as per need

8.       Doing legacy planning for loved ones

National Pension System

National Pension System (NPS) was introduced by the Government of India with an objective to extend old age security coverage to all citizens. Launched in January 2004 the scheme is now more than 10 years old. At inception the scheme was made compulsory for all new Central Government employees (excluding Armed forces) by scrapping the old pension structure for them and that was soon followed by the State Government employees as well. It was only in May 2009, that the scheme was made available for all citizens of India.

In the basket of investment tools currently available in the market NPS clearly stands out. It offers subscribers the option to choose service providers, fund managers & investment schemes along with flexibility to switch amongst the same if desired. The NPS account is fully portable and offers an online platform that enables subscribers to access their account details 24X7. The NPS contributions also provide subscribers with an additional tax saving sunder section 80 CCD (2) benefit as per the Income Tax 1961.

Retirement planning is an ongoing and systematic process. It is advisable that we introspect, study our needs and aspirations, draw a timeline and observe discipline in doing so. The earlier this process is initiated, the better it is, as we can gain from the power of compounding as well as aim for a higher return in order to lead a comfortable life in our golden years.

[Source: https://retirementplaninindia.wordpress.com/2015/09/25/perspective-on-retirement-planning/]

Seven Benefits of Buying Traditional Pension Plans

Retirement is an inevitable phase of life. One of the many products life insurance companies offer people for retirement planning is pension. Pension is aimed at securing your post retirement life, be it related to financial security, pursuing a hobby or planning a legacy. There are many reasons why one needs to plan well for retirement - increase in life expectancy, inadequate employer funded pension, change of social structures, absence of social security system, desire to remain a contributor or rest and relaxation.

Pension products can be offered either on ULIP (market linked) or Traditional (non linked) platforms (difference between ulip & traditional plans). Given the nature of these products, ideally one would want to de-risk his/her retirement plan from market volatility. That’s where traditional Pension products have an edge and have been quite popular among customers. Traditional retirement solutions are of 2 types:

1. Participating - These plans participate in profits of the fund. 90% of the profits get distributed to the policyholders as bonuses. Hence, these are also referred to as ‘with profits’ plan.
2. Non Participating - These plans do state a rate of return at outset and are not linked to the market or any index. They offer guaranteed returns.

You save regularly till you reach your retirement or do it using a lump sum as per the availability of funds. On maturity, the benefits are mandated by regulations to be reinvested, in order to generate a regular income stream, which is referred to as annuity. This feature is what makes pension plans a good fit for retirement planning.

Key advantages of buying traditional pension plans:

1. Secure Returns: Traditional pension plans offer secured and guaranteed returns. For participating plans, the secured returns are in the form of bonuses. Once declared, bonuses are guaranteed to be paid at maturity or death. For non-participating plans, the secured returns are in the form of additions. These additions are fixed percentages of the sum assured that are added every year or on maturity. Today in addition to the above, traditional pension plans also have a minimum guaranteed benefit at maturity and on death.
2. Easy Issuance: Retirement Insurance Company is the true over the counter plans. They do not require any medical tests and hence can be purchased without much of a hassle. This feature makes a pension plan possible for all, irrespective of their health condition.
3. Guaranteed Income for Life: On maturity of the pension plan, one needs to purchase an annuity. This annuity is a guaranteed income stream for a lifetime. This helps in meeting post-retirement needs.
4. Tax Benefits: Premiums paid in traditional pension plans are eligible for tax benefit u/s 80CCC of IT Act. This is subject to the prevailing tax laws.
5. Health Care Needs in Old Age: Health expenses are a major concern during old age. With improved life expectancy and increased medical expenditure, it’s imperative that health care expenses are kept in mind while doing retirement planning, more so because during old age, the eligibility for a health assurance or life assurance have their own limitations. By investing in Pension plans one can easily create a fund for any contingency.
6. No Limitation on Maximum Premium: You can invest as much as you need into these plans. Investing higher amounts means you have a higher chance of better fund creation and consequently better income post retirement.
7. Death Benefit: Though the primary objective of any pension plan is to build a corpus for post retirement expenses, it also brings with it benefits on death of the life assured. The nominee then can either choose to take the complete death benefit or can invest the same in an annuity plan that will offer a guaranteed income for life.

                [Source: http://blog.hdfclife.com/benefits-of-traditional-pension-plans-532260]