Do you know why retirement is termed to be your golden period? It is because during this period you are free from most of your life’s liabilities. You have enabled your children to stand on their own feet, created sufficient assets for your family and taken care of your family’s expenses. Now, you have a responsibility only to yourself, a responsibility to fulfill your dreams and live life carefree. But can retirement be carefree if you do not have sufficient funds to live out your years?
No it cannot be. Retirement cannot be golden if you have no funds to meet your expenses. To create such retirement funds pension plans help. Pension plans are life insurance plans which promise a regular payout from a specified date (of your choosing) till you are alive. So, pension plans provide you a regular income in your retirement. But, do you know how to choose the right pension plan for your retirement?
Choosing a correct pension plan is important if you want to live out your retirement peacefully. Here are some factors which would help you to choose the best pension plan for yourself.
Pension plans come broadly in two variants. One is the deferred annuity plan and the other is the immediate annuity plan. Deferred annuity plans allow you to accumulate your retirement corpus over a period by paying premiums. You can then use this corpus to avail annuity throughout your lifetime. Immediate annuity plans, on the other hand, start paying annuity immediately after you make a lump sum payment onetime. If you are young and have time to create a corpus, you should opt for deferred annuity plans. On the contrary, if you are retiring soon and want annuity payouts immediately, choose immediate annuity plans.
Deferred annuity plans can be traditional pension plans which pay a guaranteed addition or bonus during the plan tenure. They can also be Unit Linked Insurance Plans (ULIPs) which invest your premiums in market-linked funds. Traditional pension plans pay very conservative returns while ULIPs provide attractive market-linked returns which are also adjusted for inflationary trends. So, you should preferably choose unit linked pension plans for a better return.
In case of deferred annuity plans, you are required to pay premiums over the plan tenure which accumulates into a corpus. Choose higher plan tenure to create maximum savings in your retirement corpus. Ideally, you should buy a deferred annuity plan when young (in your 30s) and continue it for as long as you can. When the pension plan matures, buy a single premium deferred annuity plan to receive annuities from a future date.
In immediate annuity plans, you get multiple choices of annuity payouts. There is increasing annuity, annuity where the purchase price is returned on your death, joint life annuities where annuity payouts continue even after your death if your spouse is alive, etc. Among all these types, you should choose the one which would be suitable for your requirement. If your spouse is alive, opt for joint life annuity payouts so that your spouse’s financial security is ensured even after your death. If you want to leave a legacy for your children, the return of purchase price is a good option. Increasing annuity is good if you expect your expenses to increase over time. So, choose a payout solely based on your requirements.
The last consideration is comparing the different annuity plans available in the market before you settle on one. Go online and compare between the available pension plans. Understand the plan features, compare the annuity rates and then buy the plan.
Pension plans secure your retirement financially if you have ensured to buy the best pension plan. For choosing the best pension plan you do not have to do a lot of work. Just remember the above-mentioned points and then compare the plans which are available. Comparing is essential for choosing the best pension plans whether it is the best single premium pension plan, immediate annuity plan or deferred annuity plan. So, what are you waiting for? Now you know how to choose the right pension plan, don’t you?
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