We all look forward to the retirement phase of life - no running on the treadmill of 9-to-5 jobs, no bosses to report to, all hours are recreational. You may want to indulge in a recreation you have been wishing to get to but had been deferring due to work. It helps immensely if you have a regular source of income to help you live a peaceful life without basic worries about being able to afford bills, rents, groceries. Planning and investing in a pension plan or a retirement savings plan can go a long way in ensuring just that for you.
What are pension plans?
A retirement pension plan allows you to allocate a portion of money for a period and accumulates it until a pre-decided period of time. All you have to manage to do is set aside this sum of money on a regular basis from your salary. After the pre-decided period, the accumulated corpus is used to buy an annuity plan which provides a pension. Therefore, a pension plan can provide you with a steady income after retirement.
Importance of such plans
Retirement savings plans and pension plans provide you with financial security so that when your other sources of incomes begin to wane, you can still uphold your lifestyle and living standards in the light of rising inflation. If you want to live a peaceful life post-retirement, it becomes important to pick your brains and do some retirement planning. These plans can be your gateways to financial freedom in the golden years of your life.
If you are thinking that your savings would suffice you through your retirement years, think again. For most people, savings would get exhausted sooner than they think. Besides, your savings should be allocated to fund your dreams - the cruise vacation you had been planning to take or the retirement home you were planning to buy.
The pension, on the other hand, should be the cash flow for meeting your basic needs after retirement. The pension plans are structured such that money put in right now, helps to pay for a decided monthly income in the future. When you invest in a retirement savings plan, you can be assured of getting the desired corpus to fulfil your needs . This provides a safety net and additional income to you so you can enjoy your retirement years stress-free. They can also help in meeting unexpected expenses should the need arise.
Another important feature of such retirement savings and pension plans is that they carry an element of tax savings. If you want to contribute to pension plans, the Indian Income Tax Act, 1961, offers significant tax respite. That also adds as a factor why pension plans are a prudent investment to make for your retirement. We know taxes are a necessary evil, but we try all we can to claim deductions on the same.
According to Section 80CCC of the Income Tax Act in India, pension funds allow every taxpayer to save up to Rs.1,50,000 in taxes. This makes it a dual benefit of saving on tax and building a robust monthly retirement income.
Nowadays, you even get the option to customize your retirement plan the way you want & get a guaranteed income for the rest of your life. You can choose amongst a wide range of annuity options, and even select the frequency of your payout- monthly, quarterly, half-yearly or yearly. With the dual benefits of investment and insurance cover, there’s no reason for you to not secure your financial future.
What are you waiting for? There are heaps of options available - and you even have the option to customize. Invest in a retirement savings plan today and secure guaranteed income for your golden years so you can stay financially independent in retirement!
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details.
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