Life insurance plans can be a powerful and effective addition in retirement planning
People work hard throughout their lives in order to ensure a peaceful retirement. It is a time when people want to cast aside life’s worries and responsibilities and pursue their hobbies, engage in recreational activities, or realise that cherished dream of travelling the world, while the basic needs like financial protection for family, children’s education and a comfortable lifestyle are all taken care of.
For many, life begins after retirement.
However, the fact remains that a monthly paycheck will stop and sufficient funds are necessary to enjoy this phase in comfort. For that, it is necessary to take prudent investment decisions during one’s hey days, so that one can secure their future. And for that, financial planning is a must. Few thumb rules to achieve the same comprise the following:
Rule of thumb - start early: In order to derive the most it is crucial to plan way ahead. It is wise that one starts saving money as early as possible because, the earlier one starts, better the returns that he or she receives. Mid-twenties are a time when one starts earning and saving money for retirement is the last thing on one’s mind.
However, this is the time when one does not have many responsibilities. So, it is the ideal time for one to start investing for retirement; not only will one have a bigger corpus owing to the power of compounding, but one will also get into the habit of savings.
How to plan right? The ideal way to go is to select the right kind of plan to avail a regular source of income even after retirement. Basic things such as inflation, recreation costs and most importantly medical expenses must be taken into consideration. One must research, evaluate existing savings and investments, and take into account all other life goals before zeroing down on the appropriate plan.
Adding life insurance: Life Insurance can be used for retirement planning in several ways with a number of options to choose from including Pension Plans, Endowment Plans, ULIPs and Whole-life Insurance. One can opt for plans that offer lump sum amount or pay in frequencies like annual, half-yearly, quarterly or monthly income benefits. Some plans pay a bigger amount in the later part of the payout period to balance the effects of inflation or to provide a better source of income after the insured has retired. There are plans that offer the option to pay amount in every few years instead of a single large amount at the end of the policy term period.
Receive monthly payments: LifeInsurance companies offer monthly income plans, which as the name suggests offers a specified amount every month. This money amasses after a few years of payment of the premium. Such plans provide insurance cover to protect the insured besides offering maturity benefit payment at the end of the policy tenure. This product can be beneficial for those who want a regular monthly income post retirement
These various payout options enable individuals to plan their finances as per their life’s milestones, thereby providing the best for one’s family, today as well as in the years to come.
From a guaranteed secure income to getting a large insurance cover, life insurance offers large number of added advantages. These plans have a low-risk profile. With market instability being engraved in the economy, these money income options offer individuals a bankable option to hold well in times of need. Besides protecting one’s income, such retirement plans keeps the retirement savings on track and develops a sound financial habit. It improves one’s investment asset allocation and helps in managing taxes.
In the end, it is apt to say that life insurance plans can be a powerful and effective addition in retirement planning. Whether it’s to add a source of additional income, take tax benefits, or as a way to plan for long-term goals, such plans are wholesome ways to secure one’s future and live an uninterrupted life post-retirement.
The author is the Chief Distribution Officer at Aditya Birla Sun Life Insurance