How to opt for the best retirement plan for yourself?

The best retirement plan for yourself calls for understanding the various needs and making the most of the instruments available for usage.

Retirement is a phase that all of us have to go through. And just like anything else, getting yourself prepared for the same will support you go a long way. Most of us do the mistake of ignoring retirement till a later stage and then suddenly realize it is too late to start. The money you have in your bank accounts might not be sufficient, given the constant inflation rates and increased life expectancy. Chances of you outliving your money is pretty high.

Thus, picking up retirement plans and getting the right mix is a great approach for your second innings. Some terms that you need to be aware of are :

• Annuity : The monthly pension you stand to receive on crossing your vesting age.
• Accumulation Period : The duration you have with you to accumulate funds for your retirement. Apart from these terms, it is essential to keep few factors in mind before jumping into the retirement bandwagon.
• Start Early : The easiest and most ignored advice in the investment field is starting early. Starting early give you the leverage of time and compounding to increase the corpus amount you expect at the end. You could start as early as your first salary and should constantly increase the deductions towards retirement.
• Add Equity to portfolio : If data from the previous decade or so is any indication, missing out of adding equity can cost you. Investing in equity based instruments have the capability of boosting up your retirement corpus amount. There are various ways of doing so and the decision to invest should depend on your risk appetite. Doing so regularly gives you the advantage of cost average as well.
• Vesting Age : The age when you wish to start receiving your pensions. Look at a retirement plan that fits into your vesting age as closely as possible. The presence of a variety of pension plans makes life easier though. There are some which give you a vesting age of 40 years for early retirees. And then there are plans that set the vesting age pretty high at 85 years for those who want to retire late.
• Sum Assured : It is almost a no-brainer. Going for a plan that provides you higher sum assured would give you better cushion at the later stage. You don’t necessarily have to start with huge investments up front. Starting small and increasing the additions is a tried and tested method.
• Death Benefits : There are no second thoughts about having an insurance for you. However, you should not confuse the same with retirement plans. Assuming you already have an insurance, go for plans that focus much less on death benefits. So that most of your premiums come back to you in some form or the other.
• Diversified : One of the best gifts that you can pamper yourself with is diversification of the portfolio. Though equity would give you great returns, having investments in debt, income and bonds would help balance out the risk elements. You can monitor your portfolio regularly and recalibrate it as and when required.
• Don’t be a spendthrift : It feels good to spend money on things you like, but over doing it might be harmful financially. Cutting down on certain expenses can help you save more for your later stage of life. It doesn’t mean you have to be a miser at all stages, but being calculative at times surely helps.
• Annuity Plans : There are several plans that allow you to receive pension regardless of the situation. Even if you don’t survive the term, your spouse stands to benefit from the same.
• Use More Instruments : Some of the safest retirement options such as bank savings and fixed deposits won’t be your allies. While creating a retirement plan, we usually forget to factor in inflation into the calculation. You can get up to 8% in FDs as of now and assume an inflation of 5 or 6% leaves you with just 2 or 3% growth in the portfolio. Considering a wider array of products can help you achieve better returns.

Predicting and planning for retirement can be tough. But with so many tools and calculators at your help, it is certainly not impossible. Getting a right composite of products will aid you in preparing for your retirement.