help plan for retirement and offer the security of insurance.
A Pension or a retirement plan is important as it helps you build a foundation for a financially secure retired life. There are many advantages of choosing to invest in a pension plan discussed below are a few prominent ones.
Planning and investing for a comfortable retirement life is a massive task and it requires tremendous discipline as the same is not a matter of days or weeks but happens over so many years.
Investing in a retirement plan provides much needed discipline to an individual to save every year from his earnings and make the necessary contribution to a pension plan. When you choose to invest in a retirement plan you are forced to think about your retirement needs and this helps you envisage the requirements well in advance.
A pension plan is not just about investing in debt but it gives you the much needed flexibility to shuffle your investments between equity and debt or even a mix of the two. While you are young, you can choose to invest a larger proportion of your fund in equity and as you approach retirement age you can switch your entire fund into debt. And since you invest regularly in a retirement plan, money is systematically invested which helps in dollar cost averaging.
Investment requires wisdom and experience so it is best left to the experts. Besides, it also requires you to spare enough time which may not always be possible. By investing in a pension plan you are able to reliably entrust the responsibility of managing your money to someone who has the right skills. Someone who can help you get much higher returns than you would typically expect if you were to manage it on your own.
By investing in a pension plan, you also become eligible for tax benefits. Your annual Premium contributions are exempt from income tax under section 80CCC of the Income Tax Act 1961, which helps you further enhance the effective returns on your investment. One third of the retirement corpus that you accumulate at the age of retirement can be withdrawn tax free. The rest of the corpus can be withdrawn as Annuity which will be taxable depending upon your income tax bracket.
A pension plan clubs the benefit of insurance and investment. In case of demise of the insured, the nominee is eligible to receive a death benefit.