Categorized | Pension Insurance

Building a Pipeline for Retirement

Tomorrow’s dreams are built on today’s sacrifices. You, the readers might be earning quite well in your occupation/profession right now but that doesn’t stop you from planning for your future, or wait, why only for future when effective planning or say decision can make your present quite comfortable as well? In our heydays we often make the mistake of not building pipelines that would pump money for us when our bodies would tire out and we won’t be able to work. Living paycheck to paycheck is very risky proposition no matter how fat your paycheck is. Jobs can be risky, there is always a Risk of layoffs, even government jobs have a retirement date and many such jobs don’t pay good pensions. When your job gets over the pay checks would stop. Every wise person understands the value of investing money for securing the future. It is a known fact that when people earn more, they spend more and hence, it is a myth that saving and investment plan are only meant for the rich or people with bigger incomes or contrary to this, some people think that saving and investment should be done only by people with lower to average incomes as they high earners are presumed to never run out of money.

Saving and investments are equally important and necessary no matter how rich or poor you are. The people who are poor or average metaphorically carry a small or averaged sized bucket to draw water from the nearby pond whereas people with fatter paychecks carry a larger bucket to draw the water. The bottom line is that both have to struggle to carry those buckets to the pond and return home with heavier buckets filled with water. Every day they fail to go to the pond they don’t get the water. The body won’t be able to endure this struggle as it ages. The smarter way is to endeavor in building a pipeline. Constructing a pipeline takes efforts, the results won’t be immediate, the water won’t be drawn till the pipeline is complete but when it gets complete, no more toil to carry those heavy buckets to long distances would be required. The time and effort taken for building this pipeline is called investment.

Once, a pipeline is created one can take out the water through a tap in the comfort of one’s home. Similarly, we should strive for building financial pipelines so that we are not dependent on those buckets or paychecks or remuneration earned through personal efforts. Smart investments earn you that ‘precious’ residual income that many yearn to have. All financially free people have one thing in common that is, their money works for them rather than they needing to toil for it. But to be in that privileged situation you need to do the planning right. You need to build those pipelines, for that you might have to work harder till it is getting built; you might have to give up some of your leisure time for building it. Your regular job of carrying those buckets is very important till your pipeline isn’t ready or you’ll die of thirst, meaning, your job is your bread and butter so without compromising on it you would have to use intermittent time to build that dream of a pipeline. For that your efforts would be great and sometimes exhausting but if your goal is clear you would be continuously motivated to work towards it.

Smart investing calls for the concept of ‘delayed gratification’ i.e. don’t just give in to instinctive desires to spend money prodigiously, rather have self discipline to channelize it towards constructing your pipeline. There are some long Term financial pipeline plans that every earning person should start digging.

Long term Pipeline Plans

·         CDs & T-Bills

·         Social Security

·         Pension Funds

·         Stocks & Bonds

·         Your Home

·         Real Estate

India’s richest investor, Rajesh Jhunjhunwala, says for young people it is very important to put efforts in buying a home. Getting your own house is the biggest social and financial security one can get. Buying a home is a very long term pipeline, for it one has to save for a very long term and establish alternate sources of income. The second most important pipeline one should strive to create is to have residual income. Thus, Pension funds can be very important instruments to earn you regular residual income or passive income. The pension plans offered by many life insurance companies are very popular in this regard. These plans require you to pay a Premium over a period of time called the accumulation period. This premium gets invested in a fund called pension fund. These plans are of two types i.e. ‘Immediate Annuity Plan’ and ‘Deferred Annuity Plan’.

In case of ‘Immediate Annuity Plan’ you start getting the residual income or pensions as soon as the accumulation period gets over, whereas, in case of ‘Deferred Annuity Plans’ the pensions start coming after a specified and agreed period of time. S depending upon the suitability people choose their plans. The premiums paid by you, is the toil or endeavor you make in digging that pipeline. It might strain some people to take out some money from their income to be invested in such plans but when their vision of that pipeline is clear they enjoy this strain. With that thought I aptly opened this article, with the phrase “Tomorrow’s dreams are built on today’s sacrifices”.

The biggest and most dramatic pipeline in this modern world is the ‘internet’. With this complex pipeline the whole world is connected. The internet transmits immeasurable amounts of knowledge that we can tap on one’s PCs, laptops, palmtops, mobile phones etc. Thus, while investing in such plans it is important to search on the internet for better deals. There are many investment and financial products comparison portals available on the internet where plans of different companies can be easily compared. An apple to apple comparison among competitive plans helps in decision making.

Though the greatest pipeline is the internet, its biggest drawback is that many people find it too hi-tech. To solve this problem of hi-tech, the internet needs the high-touch as well. Hi-touch means human guidance and help. Most of these online comparison portals provide a voice support system, where a trained professional walks you through the online comparison process via telephone support so that you can conveniently make the investment. That effective comparison is your founding stone in your building your pipeline.