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.

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How to Go About Retirement Planning

  • Easypolicy
  • 14 Jun 2014

As life expectancy is increasing the retirement phase is gaining significance. Many people during their working phase look forward to having a great time in retirement days.

Financial constraints start affecting daily routine and habits making life really miserable. It is important that while you are young and earning, you give some thought to your retirement life. Retirement gives you all the time in the world to do what you feel like. But to deserve all this, do not forget to make the right investments in a retirement plan or a Pension plan.

What retirement corpus is good enough for your retirement needs?

The most basic aspect about retirement planning is accumulating a minimum retirement corpus which is good enough to meet your basic living expenses when you retire. Most retirement plans would allow you to withdraw one third of the retirement corpus upfront while the rest would be given in the form of annuities. If you choose Annuity for life time you can expect about 5-7 % of your retirement corpus as annual income (as per current standards). So, essentially the monthly income you get from your retirement plan should cover your living expenses well.

While estimating your living expenses during retirement do make sure that you apply the impact of inflation. Mr. Sharma who belongs to Delhi and works as an employee in a leading public sector bank is 30 years old and had about 30 years to go for retirement. He spends about INR 30,000 every month to meet his living expenses. Assuming Inflation rate at 4%, by the time Mr. Sharma would retire his living expense would have shot up to 1 lakh per month. Hence Mr. Sharma is looking for a retirement plan that can help him accumulate enough retirement savings so that he gets at least INR 12 lakhs in annuities. Assuming an annuity rate of 6% then, Mr. Sharma would need to accumulate a retirement corpus of 240 lakhs. A pretty challenging number to achieve but it is not all that difficult if planned well in advance.

How much does Mr. Sharma need to save annually now to accumulate INR 240 lakhs

The task is uphill but if Mr. Sharma chooses to make annual savings in a retirement plan or a pension plan he stands a good chance to accumulate a retirement corpus of INR 240 lakhs by the time he retires. Mr. Sharma has about 30 years to go for retirement and he should start planning now. There are various investment options he could choose from that can help him reach his desired retirement corpus. He can either choose to invest in a traditional pension plan that is a bit more conservative in its investment approach when compared to unit linked pension plan or National Pension Scheme. As a traditional pension plan is conservative it invests almost 100% of savings in debt and so the amount of return you can expect to earn is limited – probably mid to high single digits. A National Pension Scheme adopts an investment approach that is more balanced. It changes the investment mix (debt and equity) in accordance to the changing Risk profile of the investor. As a person draws close to retirement all the investment is almost shifted debt and none into equity. If Mr. Sharma chooses to invest in a unit linked pension plan he has the option to be more aggressive in his investment approach as he can invest almost 100% of his savings into equity.

So, if we assume Mr. Sharma adopts a balanced approach and invest in a mix of debt and equity a 12% return on investment in the long Term is quite possible. If his investments grow @ 12%, Mr. Sharma would need to save INR 1 lakh annually and he would safely reach his investment goal of INR 240 lakhs.

how to stay fit and pay less for insurance premium?

  • Easypolicy
  • 04 Mar 2014

To avail discounts from insurance companies, you need to be in the pink of your health. The healthier you are, the more discounts the companies will give you and you are able to save on insurance premiums. Especially, when it comes to Term cover, insurance companies offer lucrative discounts which these companies might not be able to offer on health covers. When you compare insurance premium, you would be able to get the optimum returns on your investment.

When you compare online insurance, you will find that women and non-smokers are charged lower premiums. When the insurance companies calculate premiums, there are many factors that are considered. The most critical factor is how healthy the person is. If the person is obese, with high blood pressure or diabetes, he/she  is bound to pay a higher amount of Premium when compared to someone who is healthier. In short, staying fit and healthy is the key to obtain lower premiums.
There are some policies for which blood tests are a requisite. These do not have very low premiums but these can be availed by the healthy people with no lifestyle diseases. As a proof to your sound heath, you need to submit the reports of your tests to the insurance company.

Some insurance companies offer better rates to the High Network Individuals (HNIs). This is usually given as many companies have assumed that HNI’s nowadays have lower mortality rates and lead better lifestyles with more health care facilities available to them. The HNI’s are also classified as smokers and non smokers which also has an impact on the premium they pay.

It is advisable that before you compare and buy insurance, you should ensure that you do not have any unhealthy lifestyle habit. To get the best possible discounts on insurance policies, you need to tweak your habits like smoking and drinking. Smokers need to shell out higher premiums. People suffering from obesity or any other diseases like diabetes, High B.P etc. have to bear the high costs of insurance premiums.

If you plan to buy the insurance Policy online, make sure you compare the Coverage and premium rates of different insurance providers. Group policies cost you relatively less as there are more people who are covered and henceforth insurance companies offer discounts. So, you can consider going in for group policies, if saving money on premiums is your priority.