Save today & reap tomorrow. A good retirement plan essentially takes care of your financial needs post your active professional life and ensures that you don’t have to work after retirement. It reduces the financial burden on you & your family and lets you have the lifestyle of your choice. You can then spend your retired life pursuing your passions; and also working, only if you choose to. With the changing socio-economic environment and rising inflation, it is advisable to start planning now for a smooth sailing future.
Pension plans are a tool to look into the future, and guarantee a stable financial inflow as you grow older. Pension created by an employer is a form a deferred compensation. It gives the employee tax benefits in the short run, and ensures an income after retirement. Employer created pension plans are of two types viz. defined-benefit plans and defined-contribution plans. In a defined-benefit plan, the employer guarantees the receipt of a definite amount of benefit post retirement to the employee. This is irrespective of the performance of the investments. In a defined contribution plan, the employer makes predefined contributions to the employee. However, the amount of benefit received by the employee is subject the investments’ performance.
Comparison between Retirement & Pension Plans:
Retirement plans are individual, while Pension plans are co-dependent on the employer/organisation/ trade/labour unions amongst others. Pension plans are a subset of the Retirement plans; to ensure a financial stability & further wealth creation in future, for a calm & peaceful old age with dignity.
How to choose best Retirement Solutions:
Each individual has different needs and expectations from the retirement plans. Thus the best retirement plan is the one that caters to your needs. Here are 5 simple ways to find the best retirement plan for you:
Step 1: Start early.
Step 2: Define your retirement goals.
Step 3: Consider your present financial situation and account for the financial situation you choose for your future.
Step 4: Map your needs and accordingly choose the mode of receipt of your retirement income viz. lump-sum or periodic income.
Step 5: Evaluate the available plans on these parameters and also basis the tax and other benefits (life insurance etc.) they provide in the present. Plan accordingly.
Other considerations while choosing a retirement policy:
- Minimum age for eligibility and for vesting the policy
- Policy term
- Premium Mode
- Premium Amounts
- Tax benefits, if any
- Additional benefits, if any