Tag Archive | "Pension Insurance"

Building a Pipeline for Retirement

  • Easypolicy
  • 03 Nov 2016

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.

How to Go About Pension Planning?

  • Easypolicy
  • 05 Aug 2016

Many people are very excited about retirement. A retired life is a life people want to spend pursuing their hobbies, doing social welfare or simply relax. Our entire life is spent to build a career, raising a family and work for money. Whole life is spent shouldering responsibilities of the house and we look up at life post retirement to finally live for ourselves and celebrate the remaining days of our life.

But to live a great retirement planning needs to start now. With profound planning many people are retiring as early as at 40 years of age. Throughout life we work for money and it is an enviable position when our money works for us, so much so that we don’t require working at all to support our lifestyle rather work only for passion. To see this time in our life proper planning needs to be done.

Some important things to start doing in your life to enjoy a dream retirement are discussed below.

 1) Save!!

Not every penny you make is meant to be spent. Learn to discipline yourself and set out a portion from your earnings that you are going to save and use the remaining money to pay for utilities and leisure. World famous American business guru Brian Tracy often says in his discourses that if you cannot save then the seeds of greatness aren’t in you. You need a much disciplined mind to save systematically. Habit of saving lets you be in a situation where in capital formation can takes place and provides you ample opportunities to grow your money. Rather than spending money from your earnings and save what is left, do it the other way round. Set a saving benchmark for you and spend the rest amount called disposable income. This habit would push you forward in line of your dream retirement.

2) Don’t live in assumptions!!

Many of the highly optimistic people choose not to be that far sighted. They believe to enjoy the present to the fullest and leave their retirement age to chance. They believe that they might strike some windfall at that age and don’t bother to plan for that so early. They think life is too long and retirement is going to take place after a distant future, probably measurable in centuries or millenniums. If you belong to that lot, halt now. This happy-go-lucky thinking might end you up with a trouble filled old age, wherein you would either have to toil in part time jobs to sustain yourself or live on the mercy of your children or an old home.  Be practical and start investing money in funds.

 3) Work hard in your earning life!!

This is in fact the most important and serious point in this article. Your earning life is a very important phase of your life. You need to work hard and be competitive in your profession. Try creating multiple sources of income so that you have enough income that could be divided judiciously in saving and spending. The idea is that you should have enough money with you to plan a good future for yourself without compromising on present life. Each moment of life is precious. You shouldn’t have much repents of living a dull youth in order to build a good corpus for retirement. A balanced saving and expenditure should be practiced to enjoy every phase of life. In order to do that you need to regulate your life and build your career smartly. You should be earning enough money to happily but not foolishly live the present and also putting in money in smart investment schemes in order to secure a blissful retirement.

 4) Compare and invest in investment cum Pension plans!!

In the above three points we highlighted the importance of saving and leading a regulated sincere life. Now the important part of the discussion comes i.e. what to do with the money saved or how would my money work for me? The saved money can be invested in a wide array of schemes to pay off returns. Your investment portfolio should be carefully designed to optimize the returns and balance out the risk. Many people invest in real estate and live off rental income in their old age. Having real estate also makes one eligible to enter into reverse mortgage options wherein you mortgage your house to a bank. The said bank pays you regular income till the end of your life or up to a specified period and afterwards the ownership of the house transfers to the bank. This is a very good option and becoming popular among retired people not having heirs. Another very bright and popular option is to go for pension plans provided by life insurance companies. In these plans you start investing in a fund called pension fund up to a stipulated period. Post Maturity in the scheme the insurance company provides you monthly payouts called pensions. These pensions are very vital to support your needs and to keep your dignity intact. With the money coming from these schemes you can happily look after the needs of yours and your spouse’s.

The key is to start early in such schemes in order to build a stronger corpus.  Compare pension plans to churn out the best options and save money while availing attractive features in your plans.

Myths of Retirement

  • Easypolicy
  • 27 Jun 2014

You love it or hate it retirement is a phase which most of us need to go through. There are mixed feelings that people get when they think about their retirement. At times people feel excited about having all the leisure time which they can spend the way they want and when people are not in the best of their moods they get concerned whether or not their health and finance would be in the best of shape to support their retirement plans. People try to envisage the future and there are some myths that we see a lot many people seem to develop about their retirement. Let us discuss a few myths which are more common.

Myth #1: My retirement expenses would be a lot less than what they are now

This is a complete misnomer. Expense always remain unpredictable and they can come from any corner and at a time when you least expect them. While you are young you have a family to support and hence expenses tend to be higher is what most people believe. But when you retire your personal needs are much more than they are when you are young. Most retired people are on some medications and hence health expenses tend to go up. Besides, if you want to maintain the same comfort level you will also need to hire an employee who could help you in daily chores. And, when you have all the free time in the world you want to spend it well so you will need to spend more on travel and entertainment.

Myth #2: It is too early to plan about retirement. I can do it when retirement is just a few years away

You would never ever dare to think like this if you take some time out and think about how much retirement corpus would be adequate to help you live a life that is at least of the same quality as preretirement life. If you are 30 years away from retirement and need INR 40,000 monthly for your living expenses today, when you reach retirement your monthly expenses would have gone up almost 4 times assuming an Inflation rate of 5 percent. So just imagine the retirement corpus you would need to build to generate a monthly Pension income of INR 1.6 lakh. Assuming an Annuity rate of 8 percent the retirement corpus would have to be somewhere close to 2.5 crores. Do you still think this is achievable with just a few years of savings!

Myth #3: My friends and family will take care of my retirement needs

This is easier said than done. It would be unfair to neglect the changing scenario wherein children have become more career oriented and they do not want to be constrained by responsibilities related to taking care of their parents back at home. Nuclear family is the cult today and the trend is only getting stronger. Being financially dependent will also rob you of your dignity and freedom to spend time and money as you would ideally want to. I would say, friends and family will always help but this should always be the last resort and smart retirement planning your goal.

Myth #4: I have my pension plan or retirement plant to take care of my retirement

Just investing in a retirement plan or a pension plan is no guarantee that your retirement corpus would be adequate to take care of all your financial needs in retirement. It is also important that you start investing in a retirement plan as early as possible and also invest as much that is required. Besides, a pension scheme it is also recommended that people also own a health plan separately so that the extraordinary expenses related to medical illness is funded by the health Insurer and not your retirement corpus which is limited and finite.