Insurance Awareness

How insurance can be instrumental in planning your retirement

Breakthroughs in medical technology coupled with a rising standard of healthcare globally mean that in today’s context, 60 years is not considered old, but rather advanced middle age. On the flip side, however, most people work in high stress environments, and aim to retire from their jobs as early as they can. One must consider that this means longer retirement period in the life cycle of most individuals, which points to a need for a larger corpus of savings to see them through their twilight years.

As you approach the later years of your life, ensuring continued comfort and security for you and your family gains more and more importance. It is therefore critical that one adopts a systematic and regular investment approach to building a nest egg which can ensure financial security down the line. Research has shown that the main fears people face when they are approaching retirement age are financial uncertainty leading to insecurity, growing old and being unable to care or provide for oneself. They need a guaranteed income every month if they are to maintain their current standard of living.

However, with proper planning and the right financial services partner, retirement need not weaken the financial stability that you have worked your whole life to achieve. In fact, well-structured insurance policies are often the best investment options as they ensure a regular monthly income even after retirement. It is also important to remember that in this case, it is truly the early bird that gets the worm. By planning your retirement early; you ensure that your financial security is not left up to chance alone while enjoying the benefits of lower premiums due to the reduced risk profile you enjoy at a younger age.

In India, most people tend to depend on accumulated provident fund monies and their personal savings to see them through retirement. Considering the rampant rate of inflation and rising health costs; you can see that mere savings alone will not be enough. Thus the value of properly planning your financial retirement becomes much clearer.

However, most consumers feel that retirement policies are too complex; and as such do not truly understand the benefit of buying into them. Very often, people are coerced into buying retirement insurance policies due to their existing relationships with agents, which might lead to them paying extremely high monthly deposits, receiving an unfavourable interest rate, or being forced to agree to lengthy lock in periods. All these factors can create a negative perception around retirement plans; and often dissuade people from taking up such policies or plans. Issues faced when interacting with the company post taking up the policy can also be a huge deterrent for people

While the choice & extent of your investments must be tailored according to your needs, wants and goals, there are numerous investment options available in the market which enable you to plan ahead and achieve your desired retirement corpus. Ideally; a combination of these options can help you form a complete retirement portfolio based on your age and your risk profile. Some of the effective tools that can be used to plan your retirement are retirement/pension plans; endowment products and a mixed bag of public provident fund, fixed deposits and equities. Let’s take a look at how these can be utilised in order to benefit you the most:

Retirement/Pension Schemes – Offered by mutual fund or insurance companies; these long term plans can be very useful in building your corpus for life post retirement. These often give you the option of claiming up to 30% of your sum as a lump sum at maturity of the plan; while the rest is paid off in annuitized payments. This ensures that your retirement corpus is available to you both as a windfall payment but also as a steady stream of capital; which can be used for regular spends like household & medical expenses.

Endowment plans – are a good option for those customers who are looking to build a corpus while avoiding risk. Through these plans; you pay a regular premium for a specified tenure at the end of which you receive a guaranteed accumulated corpus. This can be used to either pay off existing loans or be re-invested, depending upon your financial goals at the time. Low risk and traditional insurance products such as these are generally advantageous as they pay the sum assured or life cover to the policy holder’s family even if they do not survive the duration of the policy. They are also not impacted by market volatility.

In addition; as mentioned earlier, you can even opt for a mix of public provident savings schemes, fixed deposits and investments in equities through ULIPs and mutual funds in order to beat inflation costs.


By Rajesh Relan, MD & Country Manager, PNB MetLife India Insurance Co.