Pension – Retirement Planning and It’s Options In India
Pension - Retirement Planning and It's Options In India
Pension - Retirement Planning and It's Options In India
Administrator 01-09-2017 01-12-2017
"Pension - Retirement Planning and It's Options In India"
- Less working years than non working years
- Increasing Life Style
- Increasing Living Cost
- Nuclear family culture
- Advanced Medical Facilities
- Increasing Medical Cost
- Absence of Social Security System
Phases of Retirement Planning
Retirement Planning can be divided into various phases and you must understand the importance of every phase and indulge yourself in “good planning” at every phase of retirement.
- Accumulation Phase of Retirement:
The accumulation period begin in your working years when start keeping aside some amount of money for your retirement income. At this stage one must manage their spending properly so that they are able to save enough for their retirement income.
- Pre-retirement Years:
This phase begin when a person is in his 50s and is near to its retirement. This phase occurs when you in your final years of accumulation, at this point make sure that all your finances are lined properly for your retirement income.
- Early Retirement:
This Phase begins from your retirement age and lasts until you are in your 70s. This phase is important as you communicate all the important information to your legal heirs and you make decisions and plan finances that they will be requiring after you (e.g. estate planning, wills etc.)
This phase begin when you are in your 70s and continue as long as you are highly functional. Define reasonable steps that your family should take if you suffer from any health issue, make decisions regarding transferring of control and planning your finances for your heirs in a way that do not affect your assets that you have created in your life span.
At this point you require significant amount of help, majorly in terms of health for a proper functioning life. At this stage you must ensure that all the planning that you have done in the prior years is supportive enough for your family.
There are certain expenses after Retirement for which one must make a provision. Some include:
- Living cost
- Domestic Help
- House and Appliance maintenance
- Monthly medical cost
- Medical Emergencies
- Gifts to grand kids
- Dream Vacations
- Life Style Expenses
Factors considered while planning for retirement
- Don’t plan retirement in isolation.
- Start planning your retirement as early as you realize.
- Get a comprehensive Retirement Plan with your existing assets and the new contribution to be made.
- Keep it simple
- Don’t stop or postpone your investments.
- After retirement look for returns after Tax and Inflation adjustment
Options Available for Retirement Planning
Retirement Planning must be done with great care and responsibly. There are various kinds of schemes that are available for retirement planning. These include:
- NPS: New Pension Scheme is a retirement product that is open to all individuals. The scheme is mandatory for the government employees. This scheme has the exposure into equity and equity related schemes which is a great feature under this scheme and can help the investor in the long run. Besides this, the scheme provides the benefit under 80C of the Income Tax Act.
- EPF: EPF or the Employee provident Fund Is the most common retirement planning scheme. EPF provides the deduction of benefit of 1 lakh under 80 C of the Income Tax Act; interest on your EPF account is tax free and the withdrawal is also tax free if there is a continued service of 5 years minimum. It is important to stay invested in this scheme to reap the benefits o f guaranteed return.
- SCSS: Senior Citizen Saving Schemes is the most common scheme among the retired people. As the name suggests that the scheme is only available for the early retirees and senior citizens. SCSS can be availed either through post office or nationalised banks.
- POMIS: Post office Monthly Income Scheme is a five year investment scheme with the maximum cap of 9 lakh under joint account and 4.5 lakh under single joint. The interest rate under this scheme is payable on a monthly basis. This scheme does not qualify for any kind of tax benefit and the interest is fully taxable.
- Bank FDs: Bank FD is another popular investment scheme among the retired persons. The safety and the fixed returns that these schemes provide make a reliable source of investment among the retired people.
- Tax free bonds: Tax free bonds are generally issued by the government backed institutions and are highly safest investment tools. These can be purchased and sold at the stock exchanges as these are listed securities. This tool is beneficial only when the investor is planning finances for long term.
- Immediate Annuities: Retired ones can also consider the various immediate annuity schemes provided by the life insurance companies or the mutual funds. These schemes invest your money and diversify among various asset classes with the aim of providing monthly amount to the retiree.
Besides these schemes, there are many other instruments that are available which the investor can avail as per his requirements but always remember that one must not delay his retirement planning and start as early as you can.
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