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 Tax Benefits: The final payout is provided in two ways. 33% of final pay out can be withdrawn in lump sum and is not taxable.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