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Retirement Planning is a primary financial responsibility. In the early stages of life, we pay attention to our short-term goals and hardly think about retirement. However, it is not a healthy financial habit. We need to plan for retirement to maintain a certain standard of living even after our active working life is over. In addition to that, expenses will only increase due to inflation and unprecedented medical expenses.
How can we handle such emergencies? If we use the lump sum retirement benefit, how will we manage our monthly expenses? Smart retirement planning can resolve these problems easily.
Let us understand why calculating a retirement corpus accurately and opting for retirement plans in India are important and how to do so.
There are several reasons specific to every person for planning a retirement corpus. Here are some of the general vital reasons:
Comfortable life: We always look for relaxed retirement years after a very busy career. We could prefer to pursue our passions, take a newfound career, or in general keep ourselves preoccupied, happy, and healthy. However, to satisfy these aspects and handle the normal daily utility expenses, we need a regular income. It will help us during unprecedented emergencies too.
Inflation: The modern economy is quickly affected by national and international developments. The number of expenses we had a decade ago is not the same now and will not be the same after a decade. Inflation will be the greatest factor for every individual because it will interfere with family expenses.
Planning your present life: Arriving at the retirement corpus amount will help us plan our current life by planning our income based on the savings on retirement pension plans.
Family security: Our responsibility is to satisfy the family with all the requirements to live happily now and forever. In the unfortunate event of your demise, the family should survive meeting all the financial commitments on time.
For example, as a parent, you strive to provide for your children’s dreams and as a spouse, you work towards ensuring a secure financial future for your partner. Due to these reasons, it is best advised that a plan as a comprehensive package with insurance and retirement benefits be chosen.
Here is a simple method to calculate your retirement corpus.
Calculate monthly expenses: The best way to start with your retirement plan planning is to calculate the monthly expenses based on your lifestyle and utilities. It will include groceries, electricity bills, phone bills, water supply bills, etc. You can take into consideration the current level of expenses as the basis and make these calculations. However, you can exclude the loan instalments because you would have ended paying them up by your retirement.
Decide on the number of years to retirement: This will depend on the person’s age and type of employment. Based on the current income, expenses, short-term and long-term financial goals, we can decide the approximate number of years to retirement.
Consider the inflation rate: If you start saving your money without considering the inflation rate, all the expenses incurred after retirement may not be handled as planned. Prices would have increased tremendously and may seem difficult to manage.
Based on these factors, you can calculate the Monthly Expenditure during the retirement phase.
Monthly Expenditure at the time of retirement = Current Monthly Income * (1 + Rate of Inflation) ^Number of years to retirement
You can also calculate this accurately with a retirement calculator.
Further, you should add annual expenses to arrive at the retirement corpus. The rate of inflation and the rate of return for investments will vary during the retirement phase based on the economy. You can consider that and find the corpus you need from such sources to live comfortably in your later years. It is always appropriate to choose savings and investment plans to give you moderate returns with very low risk during the retirement phase.
However, during your current earning phase, secure your retirement with the best pension plan that will ensure a sum assured for life cover and a monthly income. Here is a brief that will suffice your retirement expenses in the best possible manner.
Life insurance is a way to ensure financial security. Life insurance with a guaranteed1 monthly income would be a good way to secure your family and plan for your retirement as well. Tata AIA Retirement Solutions provide the dual benefits of life cover and flexibility to plan your monthly income for about 15 to 20 years.
Convenient premium payments with optional riders# and policy duration can help you enhance the plan. Based on the premium paid monthly or in any interval, the sum assured will be provided on maturity along with monthly income post that year. In addition, it will be paid to the nominee in case the insured person meets with sudden death.
These plans offer tax* benefits under Section 80C for the premiums paid and tax* exemptions on returns under Section 10(10 D) of the Income Tax Act, 1961.
We have seen the importance of retirement planning. We have also seen why deriving at an exact amount is also essential. Having understood the different factors, we now clarify how the retirement corpus needs to be calculated. The plan to achieve an appropriate retirement corpus is to have a guaranteed monthly income plan (110N147V02).
Try to accommodate a smart savings insurance plan and handle the retirement corpus requirement in the best possible manner. If you want to live a contented life after retirement, you should plan your corpus as early as possible!
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Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
* Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
#Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please refer to the rider brochure or contact Tata AIA Life's Insurance Advisor/ branch
1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry