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Self Employed Persons Need Pension Plans

Ananya is a freelance designer, and she did not put much thought into investment and tax planning until recently. But she was talking to her friends who are not self-employed, and she realized that they all had retirement plans all set up in place.

She researched a few methods to plan for her retirement and started putting in a part of her earnings into an account to save for her retirement. She realized that with the right retirement plan she could maximize the money she saves and save up enough for a safe future.

Retirement Funds for Self Employed People

There are a number of perks to being self-employed. It gives you a kind of independence and flexibility that no other profession allows. However, it does come with its own set of problems as well. One of these is that fixed pension plans from employers will not be available.

This means that self-employed persons will have to come up with their own ways to ensure financial stability after retirement, as well as investment and tax planning. As the earnings that you will be making are sporadic, many such people often only find it possible to save inconsistently, while many don’t save at all.

However, despite the problems that accompany self-employment, some kind of pension scheme must be given priority to have a secure future.

Self Employed Persons Pension Plans

There are certain pension plans that have been made to support self-employed people, and some of these investment and tax planning schemes are:

  • Monthly Income Scheme (MIS): Monthly Income Schemes are a one-time opportunity to invest provided by a variety of financial institutions and post offices to entice investors. For loans of up to 15 lakh, the rate of interest typically varies from 7.5 to 9% over a five-year time frame. This is a central government pension scheme in which, on a recurring basis, money is transferred directly into the customers’ savings accounts. The income gained through MIS, however, is not tax-free.
  • Public Provident Fund (PPF) Scheme: PPF schemes are a part of national pension scheme benefits, that have an interest rate of 8.8% that can appeal to investors. The money in this pension scheme is locked for 15 years, and the interest will be increasing every year due to compounding.
  • Mutual Funds (MF): Non-banking financial institutions provide a wide range of assets to fulfill the diverse demands of investors. Mutual funds are a part of a contribution pension scheme. Their contributions are immediately invested in debt and equity via mutual funds. These have a three-year hold duration. You have the option of redeeming after three years or continuing for a much-prolonged duration for higher profits. The sum of the redeemed will be tax-free.
  • National Savings Certificates: This is a central government pension scheme in which there are two types of National Savings Certificates, the 5-year scheme and the 10-year one. The benefit for self-employed persons is that they may purchase the certificate at once while they have extra cash, eliminating the need to consider a periodic monthly and quarterly repayment plan.
  • Stocks: There are many companies whose stocks you can invest in during investment and tax planning. They often give good returns in the long term. You should research well and make informed decisions while investing in the stock market.
  • Infrastructure Bonds: This is another type of contribution pension scheme that is issued by non-banking financial entities each fiscal year. The cash raised will be used to support infrastructure facilities in India, as well as give attractive interest rates in the region of 8% to 9%.
  • Gold Funds: Throughout times, gold has also shown to be a viable investment opportunity for those seeking minimal fixed returns. Gold investments are expected to yield roughly 10% to 12% each year in general.

 

National pension scheme benefits are many, and self-employed individuals should make use of these schemes to secure a safe retirement time. These are some pension plans that you can consider if you are self-employed. To remain responsible about your own future, you should consider investing in them, or setting up a way to ensure your financial independence even in later years.

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