If you have an eye on your retirement age and have an eye on investment for retirement income, it is never too early to start your retirement planning. It takes a good Pension
plan to come up with the right solutions that would make it happen for you as you take your tiny steps towards retirement age. So, what are your options?
Public Provident Fund (PPF)
One of the accepted forms of investment for retirement income is the public provident fund (PPF), a fixed investment and an attractive one in that, primarily because of the levels of returns that you get out of the investment and also due to the tax benefits that you could get on your retirement planning. With tax free interests that are compounded, you could expect to earn your interest as well as interest on your interest, a feature that should make the pension plan an attractive one. However, you may have to compromise on liquidity with this investment tool – if you are solely looking at your retirement age and are not concerned about liquidity, PPF may be an option for you.
National Savings Certificate (NSC)
Popularly known as NSC, this is an option for retirement planning with high levels of safety in place. As with PPF, the interest accrued with NSC is also compounded, providing for reasonable rates of returns. However, the casualty, again, is liquidity, as encashment of funds invested in NSC prematurely is out-of-question for all practical purposes. With income tax benefits also built into the instrument, this is one pension plan that you would want to consider, as long as the lack of liquidity doesn’t seem to matter much for you, and if you are happy with reasonable rates of returns on your investment for retirement income.
National Pension Scheme (NPS)
This is a Government project to help the average Indian citizen with retirement planning, a move that is made compulsory for Central Government employees and one that leverages the wide network of banks and post offices in the country. The advantage with this pension plan is that you could plan early for your retirement age, choosing among three instruments for investment – equity, corporate bond and government bond. Further, you could also choose your fund manager on an annual basis, unlike it is in the case of mutual funds. The minimum contribution stipulated is Rs 6,000 per year. The advantage of choosing the NPS as your investment for retirement income is that you would have minimal fund management charges. However, you do not have tax benefits under Section 80 C, which could be seen as a drawback when it comes to Retirement Planning. Insurance
This is, perhaps, one of the most popular perspectives towards retirement age and one that is widely looked upon as the preferred investment for retirement income. With regular payment of insurance premiums, and in consideration to certain Exclusions
as may be listed in the insurance policy, the main advantage with using insurance for your pension plan is that your family remains protected in the event of unfortunate events as in the case of death or critical illness. Further, there are also options that you could choose from, depending on whether you would want a Term
plan that has no investment option included, or you would want endowment plans that also have Maturity
benefits. Endowment plans
may be costly and provide low returns, though you could have specific requirements translated into tailor-made options to manage your investment for retirement income better. Insurance is an option that provides benefits such as:
Post office Monthly Income Scheme (POMIS)
- Coverage in death or critical illness.
- Financial security for family members in the event of death of the policyholder.
- Option of using this tool for retirement planning with wealth creation option involved.
- Customization options available to make it more appealing as a pension plan.
- Apart from considerations towards retirement age, there are also tax benefits involved.
This is an example of retirement planning that is easy to start and operate on account of the enormous reach that post offices enjoy. With a tenure of 6 years and with a reasonable rate of interest, the only problem with this option as a pension plan is its liquidity issue. You may withdraw after three years of investment without any deduction. This could be an investment for retirement income if you are okay with safe and reasonable returns.
Fixed Deposits (FD)
You could also opt for the age-old fixed deposit schemes with banks for regular interest payouts, setting you up for your retirement age. This is another pension plan that has strings attached with liquidity and premature withdrawal.