To be able to enjoy the best things in life and have a financial safe future you need to have a good job. If you start working you could either earn more from early on rather than earn less if you start working at a later stage of your life. People usually plan their retirement early on so that they can enjoy a financially independent life without any pressure of work.
However, this is not possible for everyone, especially for people whose income is mostly spent on vital expenses. This could leave them with a depleted amount of savings for the future, especially after retirement. In such situations, one could invest in a pension plan to get fixed income once they retire. If you are planning your retirement and are wondering if you should invest in this plan and have questions about it, read on to know more.
What is a pension plan?
Pension plan is basically a type of life insurance product. When you invest in this plan you get a fixed amount of income every month after you retire. Based on what you invest and the kind of plan that you select while you’re working, the amount that you would get as income would be based on these factors. There are different types of plans that help you after retirement. You can opt for ULIPs, or you could go for a deferred or immediate annuity plan. These plans have different benefits, and they are more beneficial post-retirement.
What questions are commonly asked?
If you are planning on investing in this plan, listed below are a few commonly asked questions that can give you a better idea about how beneficial this plan is.
- What is the ideal age of retirement?
In a country like India, the official age of retirement for government employees is 60. While the age of retirement for private employees is considered to be between 58 and 62. However, many people prefer to retire early so they could get to spend more time with your family or pursue other dreams that they have which they cannot pursue while they are doing a job. For such people the ideal retirement age could be the early to mid-40s or somewhere around the early 50s. Depending on what your income is and what your life goal is, the age of retirement should be based on that. Retiring early with less income and lesser savings could put a financial burden on you in the future.
- Can I retire early?
As mentioned earlier, many people prefer to retire as early as possible rather than keep working late into their life. If you do plan on retiring early, like around the age of 40 to 45, do keep in mind that once the plan starts paying the fixed income, it will only have paid till a certain period of time. Insurers have set limits on these pay-outs. If you retire early, that means the pay-outs will stop at an early age. It is always better to keep this factor in mind before you plan an early retirement.
- Is another insurance plan required?
While you are guaranteed fixed income from this plan, simply relying on one plan for your future could be disadvantageous. The amount that you earn from this plan may not be able to help you during medical emergency. Or, if you have any outstanding loans that are yet to be repaid the income might not help cover these expenses, especially in your absence. So, it is always better to invest in another policy, such as a life insurance policy, that would provide lump-sum compensation.
- Can I get income after a specific time period?
There are 2 types of plans. One is immediate annuity and the other is deferred annuity. In immediate annuity, the payment starts immediately after your retirement. If your requirement needs money immediately, this plan is better for you. However, if you want the monthly income to start after a certain point of time, you should opt for the deferred annuity plan. Based on your requirement the insurer, will start the pay-out at the point of time chosen by you.
- Can I change the nominee?
Yes, it is possible to change the nominee in this plan at any given point of time. If the current nominee is your spouse and you want to change it to your child, you can do so. It is always better to discuss the due process with your insurer to get a better idea.
These are some of the commonly asked questions about this plan. If you are interested in investing in this plan, use the retirement calculator on your insurer’s website to get an idea about the ideal age of retirement and how much you would need to invest and the income you would get from it.
