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