Helpful Pointers For Selecting Which Pension Plan Is Best For You
Abhishek did not think much about investment and tax planning until he met his friend Rahul, who has to send monthly installments of money to his parents to support them financially. He realizes that his parents already have a foolproof pension plan in place and that it is the reason why he does not need to help them out.
In order to make sure his children won’t need to spend a lot to support him, Abhishek decided to invest in a pension plan immediately.
What is a Pension Plan?
Pension plans or retirement plans are a scheme where your employer is supposed to set aside a certain amount of funds for the employer’s future benefit. Any responsible citizen should invest in a pension plan to secure their future. This is just as important as other typical investment and tax planning schemes.
With life expectancy rising, as well as the cost of living, if you want to spend the last few decades of your life comfortably without relying on anyone, a pension plan is a good idea. It usually constitutes a monthly payment made in a fixed format.
Why do you need Retirement Planning?
It is considered that the earlier you start preparing for your retirement, the better it is. You will need to consider retirement investment due to a number of reasons:
- Health Problems: As you grow older, you may not be able to work due to declining health and old age. If you have medical issues that need constant treatment, this could also be a major drain on your account.
- Emergencies: Life is unpredictable, and emergencies can happen at any time. This can range from natural calamities to medical problems. Having a sustainable pension fund to rely on can take a lot of stress from such sudden occurrences.
- Inflation: The cost of living and expenses are only going to increase with time. This is one of the main reasons why having a secure fund to support you will be a major relief once you are older.
- Independence: If you have a well-defined life insurance retirement plan, you can spend the elder years of your life without relying on anyone. Not only will financial independence give you confidence and peace of mind, but it will also let your children work and live their lives without worrying about you.
Tips to consider while selecting a Pension Plan
- Start Earlier: The faster you start investing in retirement plans, the more returns you can accumulate over time. It is ideal if you start retirement investment planning from your first job, that way the total earnings you can accrue will also be larger.
- Invest in Equities: Equity funds, stocks, and holdings can often give you long-term earnings rather than interests or bonds. This is an avenue you should definitely consider while thinking of pension plans.
- Get help from a Financial Planner: Equities, investment and tax planning can get confusing without enough financial information, so do consult an expert financial planner before making important decisions.
- Guaranteed Pension for Family: One thing you should try to ensure in pension plans is that they provide assured pension to family members in case of unforeseen death of the holder. A good life insurance retirement plan should be able to take care of both you and your family, even if you are not around.
- Your plan should be Flexible: You might be able to earn much higher in different times of your life, so the best pension plan should have the possibility of adjusting the premium according to your needs.
- Acceptable Annuity: Your plan should have an annuity option that is best for you. Investment and tax planning should happen after you’ve decided whether you want a plan that offers pension irrelevant to the survival of the holder, or one that gives pension to the spouse or any other family member.
- Bonuses: Try to find pension plans that offer timely bonuses. They can help to increase the money you can make over time. An example of the same would be if the plan offers a loyalty bonus.
- Inflation adaptable returns: The cash you make should not be affected by inflation that takes place before retirement. You should make sure to get the best pension plan that gives returns that reflect the increasing prices of commodities.
There are many pension plans out there, and the perfect one for you would depend on the kind of money you are making, as well as the investment you want to make. So make sure that a good retirement plan is something you think of and implement, as it is a necessity in today’s world.
When can you withdraw from a pension fund?
You can withdraw your funds from a pension fund once you reach the specified retirement age. If you experience any financial problems before the same, you can dip into your retirement money, but this money may be tax payable. You will also need to fix another plan or plan your funds accordingly.
Can a pension keep paying you forever?
Yes, pension payments will be done for as long as you live. If you pass away before the end of the term, the payments will usually be made to your spouse.