Retirement from work is inevitable, so it would be prudent to prepare for your second innings. Building a sizable corpus to meet your obligations post-retirement is the ideal method to retire with confidence. This is why your financial planning is incomplete without a robust pension plan. A strategy will meet your day-to-day financial needs and allow you to live an independent retirement living.
After understanding the benefits of a pension scheme, the next stage is to select the best retirement plans. The information provided here will assist you in understanding the factors to consider when choosing a scheme to match your needs.
Factors to Consider When Selecting a Retirement Plan
It is generally advisable to begin planning for retirement in the early years. Here are a few vital points to consider when selecting a pension plan.
- Inflation-Adjusted Returns
Pension plans are considered long-term investments. The problem with investing for a more extended period is the capital loss caused by fluctuating inflation. Inflationary pressures have a long-term negative influence on the value of your corpus. As a result, it is crucial to invest in a pension plan that provides inflation-adjusted returns. In other words, your fund is unaffected by inflation and grows in value when commodity prices rise, allowing you to maintain your current lifestyle.
- Target Adequate Pension Income
Choose a plan that provides sufficient income (after tax deductions) for you and your dependent family members to manage your expenses. Additionally, your plan should provide comprehensive coverage and a death benefit to family members in the event of your unexpected death.
While it is best to begin saving in your pension the month you receive your first paycheck, your capacity to pay a more significant premium may gradually increase over time as your income grows. Thus, you should select a pension plan that allows you to enhance your premium contribution via top-ups. Even a minor rise in the premium each year will significantly improve your corpus money over time. Thus, a flexible plan is a necessity for long-term investments.
- Offers Financial Benefits
Some of the best retirement plans include cash incentives over time, such as a loyalty bonus. This contributes to the growth of your wealth.
- Complimentary Benefits
Specific retirement schemes come with add-on features to make them attractive to applicants. This may include a premium waiver in case of policyholder’s premature death, higher accidental death benefit, etc.
- Easy Liquidity Option
Following retirement, you may need money to address an emergency. This is where having a pension plan that allows for partial withdrawals is preferable. It will assist you in meeting the financial requirements in times of crisis.
- Select Appropriate Annuity Option
You must select a pension plan that includes the annuity option that is best suitable for you. For example, specific retirement plans guarantee an annuity for a set number of years regardless of whether the policyholder survives or not. On the other hand, various savings plans provide annuities to the policyholder’s beneficiaries after his death. Purchasing a pension plan is a sensible option that will assist you in living a pleasant and stress-free life after retirement. However, it is essential not to postpone the decision and to invest immediately to build a corpus via the power of compounding in the long run.