Retirement planning

Retirement planning is the action of planning your income expenses, including a savings program, while managing assets and risks to achieve all your future goals and dreams independently.

Introduction

Planning for any task ensures that we can select the best possible results for ourselves. Similarly, retirement planning is a multi-step process where we save and invest our money to set us up to enjoy and meet our post-retirement goals and aspirations. Generally, it is a lifelong process. It can be started at any point in an individual’s career, but it works best for the people who start at the earliest. It needs the individual to estimate the amount of money one will need.

Retirement Planning

Everyone needs to understand the importance of retirement planning. Every plan is unique and varies individually. Based on your age, the retirement plans and the type of investment one makes can change:

Young Adulthood (21-35 years): Even though people at this age do not have a massive amount of capital to invest and save, what they do have on their side is time and the power of compounding. If invested correctly and regularly, even small amounts of money can compound to large quantities later. Compounding allows us to earn interest which in turn facilitates more interest. Thus one might have less money at this stage, which will grow as one grows older, but one can’t make up for the lost time.

Early Midlife (36-50 years): This is when both the amount you earn and your financial burdens grow. One still has a lot of time for investing, and the power of compounding still holds for this time. Thus this is the best time for aggressive investing. It is an investment strategy that maximizes one’s returns by making riskier investments. This type of investment suits the younger population as they can ride market fluctuations and incur losses without many consequences.

Late Midlife (50-65 years): This is the time for conservative investing. It is never too late to start investing, and investing in one’s 50-65 has some benefits. During this time, most of the mortgage and other sources of cash efflux is normally dealt with. Thus you have a high amount of capital that can be invested in the market. Also during this time, the government provides lots of old age security benefits and services which can be availed.

Retirement Pension Plan

Pension plans are maintained by various banking or other insurance organizations that help individuals secure their financial aspects post-retirement. The top pension plans in India can be listed as:

LIC Jeevan Akshay plan.

LIC Jeeva Nidhi

SBI Life Saral Pension Plan

HDFC Life- Click2Retire

HDFC Life- Assured Pension Plan

ICICI Pru – Easy Retirement

Reliance- Smart Pension

Max Life Guaranteed Lifetime Income Plan

These are some of the pension plans that anyone can avail of. It is of prime importance that before taking up any pension plan, one needs to properly understand the terms and conditions of that specific plan. Also, it is generally advised to go through a few plans understanding what each offers and choosing one that might suit you the best. Thus retirement planning is vital for anyone and everyone. It is good to be safe than sorry later.

NPS Pension Plan

India has a voluntarily defined pension system where the entire amount can be withdrawn tax-free. It was applied for any employee that joined after April 1, 2004. It was initially designed for government employees, but now anyone between 18 and 65 can apply for it. Inside this scheme, any person regularly contributes to his/her account during their work life and withdraws a sum of money completely tax-free during retirement. They can also extract the other half of the money to buy an annuity to get a regular source of income after their retirement. This facility is also available for a Non-Resident Indian until their nationality remains unchanged.

Conclusion

Through the course of this article, we have witnessed how proper retirement planning can help set one up to achieve their goals and aspirations post-retirement. We also went through the different timescales and the different types of investment plans one can adopt based on their age and status of earning. We talked about a few retirement pension plans that can suit anyone looking to set up one. According to government norms, any person joining service after April 1, 2004, will set *up an NPS account and use it as per their requirements based on the NPS pension scheme. Finally, it must always be noted that pension plans are highly relative and vary from person to person; thus, one should carefully consider their options before settling upon one.