This Independence Day, herald the arrival of a new era of financial independence and goal setting.

How would you like to make your personal life less stressful by planning ahead of time? By investing in an exceptional retirement plan, you can enjoy long vacations, set your schedules with lesser stress, and spend your savings prudently. In other words, by instilling a sense of well-being in your day-to-day life, you can look forward to your old age years being happier and more enriching.

Covering the sunset years?

As you reach your retirement years, your thoughts may be shadowed by the concerns of medical costs, loan repayments, day-to-day expenses, and so forth. This is where popular retirement plans by life insurance companies come to your rescue. In all cases, they offer the dual benefits of insurance and investment. There are two phases in typical retirement plans: the accumulation phase and the withdrawal phase. Regular contributions are to be made to feed such plans. The money deposited is invested in select securities that are IRDA approved. By investing in the right mix of securities, these insurance plans offer viable returns that are added to their maturity value.

After this stage comes the vesting period where regular pay-outs start coming into the insured’s kitty (as per the selected plan). These products tend to have a vesting age of 40 to 70 years and are skilfully designed to provide ample coverage and helpful pension options. You may want to opt for immediate annuity options wherein you need not wait for your retirement years to start getting returns in the form of regular income. These annuity plans are guaranteed for life. There are several annuity options available - annual, half-yearly, quarterly or monthly – take your pick.

Earlier the better

Once you have decided to purchase a retirement plan, it is best to start accumulating at the earliest and let the power of compounding work its magic. Compound interest is the interest that accrues on the amount of money invested by you; in turn, the compound interest accrues interest in itself. This leads to a rapid snowballing of the amount that becomes payable to you when you retire. You may want to start with a modest amount and hike your contributions as your income increases.

Equities are essential

In the case of retirement, as your financial targets are longer, the effects of inflation will reduce the purchasing power of money in your hand eventually. Equities may enhance the value of your portfolio. While the cash lying in savings accounts, money market deposits and short-term CDs serve as emergency funds, stocks are a great option for fulfilling long-term investment goals. You may want to go for unit-linked pension plans or invest in equity stocks or funds as per your preference. Along with equities, the specific weight has to be given to fixed deposits and gold to attain your post-retirement aspirations.

Switch off auto pilot mindset

To get closer to what you will get at the time of your retirement, the impact of long-term inflation has to be considered as well. The popular Public Provident Fund (PPF) offers 7.9% returns (before inflation and subject to change as per govt notification time to time) only. Therefore, it is a good idea to look beyond the conventional EPF (employee’s provident fund) and PPF (public provident fund) schemes that may not be enough for fighting inflation.

Embrace freedom from financial worries

A pension plan that promises a higher assured sum, bonuses and benefits is the way to go. It’s a good idea to compare the expenses attached to different retirement options before choosing the most cost-effective plan. As financial planning for your second innings in life is a serious business, do consider the engagement of a competent financial planner for handling its execution process adeptly. 

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