Are you looking forward to life after retirement? To help you prepare, here are answers to common queries about pension plans and why you need them.
A wise person once said how much you earn isn’t important, but how much you save. Old age can be fraught with unplanned emergencies, both financial and medical. It is a common practice to put off personal projects until retirement. With the choice of well-crafted pension plans there is a way to make sure that your globetrotting dream comes to fruition even after retirement.
Investing in a retirement plan is a great start towards fulfilling personal goals that tend to take a backseat over the course of everyday life. If you are still in doubt about why you must start saving up for retirement, here are a few points to consider:
- What do you need to do to maintain your current lifestyle even in your old age?
- How do you plan on handling cost-intensive medical emergencies after retirement?
- Have you considered the implications of inflation in the years to come?
- Is there a surefire way to ensure that you are invested even after retirement to prevent the depletion of your retirement corpus?
Additional Reading: 5 Ways To Make The Most Of Your Retirement Corpus
The point of these questions is not to give you sleepless nights. Instead, they should keep you geared up for any complications old age might present you with. Have no fear as we present you with a compilation of factors associated with the choice of a retirement plan that is well-suited to your needs.
The retirement scenario in India
Statistics are ample proof of a burgeoning elderly population in the next 30 years. Unfortunate as it may be, there is still a long way with regards to building a strong market for retirement planning in India. While Employees’ Provident Fund (EPF) and Public Provident Fund (PPF) are the commonly preferred pension schemes in the non-governmental organized sector, the National Pension Scheme (NPS) Tier-I is a government-sponsored pension plan. Similarly, individuals from the unorganised sector can opt for the government-guaranteed Atal Pension Yojana.
Necessity of old age pension coverage
It is essential to allow a portion of your income to accumulate over time and reserve it for your old age. This acts as a financial safety net. Doesn’t it make a world of sense to save for your post-retirement years instead of having no source of income to bank on after retirement? Why wait till you are in your 60s and fume and fret about financial coverage so late in life? Begin today and start securing your post retirement goals before your funds begin to dwindle.
The high cost of medical coverage is one of the more compelling factors behind the need for old age pension funds. With the elderly population exposed to the rising risk of illnesses and medical conditions, it is imperative to understand the importance of medical insurance after 60 years of age. In addition, the current increased life expectancy means that one must be financially equipped for a longer period beyond retirement. Simply put, having a retirement plan in place keeps you financially stable even after retirement.
Additional Reading: 9 Golden Rules Of Retirement Planning
Myths associated with retirement planning
Many of us are of the impression that our employee pension is enough for our old age plans. Therefore, most of us shrug off the idea of retirement savings by assuming we’ll cut down on expenses after retirement. However, this might not always be possible with unplanned trips, medical emergencies, and financial crunches getting in the way. Considering inflation and ever-skyrocketing prices, will your fixed pension be adequate for all that you have in mind after retirement?
Contrary to popular belief, it is not wise to put off your investments in retirement planning for later. It is advisable to start planning your old age pension as early as your 30s since this enables the financial benefits of your investments to accrue over a longer duration of time. Being an early bird also implies that you have to save a lot less every month if you start at the age of 25 than if you start at 30. Intriguing, isn’t it? For more insights on an early start to retirement planning please click here.
Most people feel that simply saving for retirement is enough. However, it is equally necessary to consider avenues of investment. Investing your savings paves way for it to fetch returns, besides making sure that your money does not lose value and can beat inflation. Mutual Funds are a popular way to prepare for retirement funds.
For instance, the Systematic Investment Plan (SIP) is a way of organised investment at regular intervals. The amount invested can be as low as Rs. 500. The belief that one does not need to invest his/her savings is one of the most popular myths about retirement plans. Click here to know more about some of the well-performing SIPS.
How to apply for a pension scheme
The application for a pension account is fairly easy and simple. As with almost any application procedure these days, Aadhar is mandatory while opening a pension account. Click here to check out the information necessary for setting up a PPF account.
The registration for NPS can be carried out though the Aadhar or PAN numbers. Here is a link highlighting the requisite details for those keen on opening an NPS account.
As the market is flooded with a host of pension plans, it can be daunting for a person to effectively choose one. Here is a list of the top pension plans that are sure to keep you covered even after you retire.
Additional Reading: Annuity / Pension Plans in India – Detailed Overview
After retirement, the source of a stable monthly income may no longer exist, but expenses are sure to continue. Therefore, taking stock of one’s spending is key to a healthy financial practice. Needless to say, the lack of forethought about old age is a practice best avoided. We wish you a happy and secure future!