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Wednesday, 22 May 2013

Planning your Retirement

Retirement Planning is the goal of every citizen to save a corpus for his old age. Many developed countries provide social security and support for senior citizens, but in many developing countries like India, an individual is dependent on insurance policies and pension plans. Savings in banks may not help as inflation is a risk and one may not know what is going to be the expenditure need to earn a livelihood in old age. Hence, it is wise to keep investing a small corpus periodically till retirement that will accumulate to a good saving for future by way of compounding.

Whatever a person's age is, it is good to believe as is always said "Actually, it's never too late !!" Hence if you have not invested yet, plan up your retirement now and make your future safe. You may also need to choose the right investment plan as there are a lot of private companies giving policies, it becomes prudent to evaluate their features that is right for you. Government pension schemes are safe to invest for many, as for them trust is majorly the influencing factor, since the cost is less and the returns are promising.

Here are 5 things you need to know as you plan for retirement:-

1. Start savings as early as possible
Though it is never too late to start, the sooner you begin saving, the more time your money will have to grow, by way of compounding factor with gains accumulating every year. The more is the number of years the better is the compounding.

2. Know your needs for retirement age
At the first point, you must have a clear projection to how much you will need at the retirement to serve your basic minimum needs. In case, if you speculate additional needs you may need to target equivalent savings. Set your goals and make right assessment of your needs during retirement and plan your savings accordingly.

3. Choose right plan for investment
There are many investment products available in the market, but you may need to choose astutely which product has satisfactory returns. Plans with guaranteed returns may be profitable while market linked plans may turn out to be risky. However, you may choose to invest in additional market linked plans based on your risk appetite.

4. Factor in health & emergency needs
While choosing which plan is best for you and what your financial needs be, you may also need to consider health inclusive and corpus for any emergency needs, however, a separate long term health plan is wise to invest.

5. Build up assets early
Building up assets as early as possible gives you a moral security for lifetime. Investments like property and other assets may give you a profitable return on the long run in case you plan to sell it. However, you may also need to consider the depreciation factor of your assets.

An example of government based Pension plan for the Indian investors is:-

National Pension Scheme (NPS)  
Product Structure:
The scheme is available in two forms:
1. Tier-I account -  Where a subscriber cannot withdraw his savings before maturity, i.e, Premature withdrawal is not allowed
2. Tier-II account - Where a subscriber can withdraw his savings anytime, i.e., Premature withdrawal is allowed

Every Indian Citizen in the 18 to 60 age group can open an NPS account

Features of NPS:
NPS is meant for the common people of India. The other important features of the schemes are:
1. Scheme of Government of India for Old age pension
2. Each subscriber will get an Identity card with his photograph, name and signature, known as 'PRAN Card" with a separate individual
3. Yearly deposit
Minimum: Rs 1000
Maximum: Rs 12000
4. You can deposit as low as Rs 100 per month. There is no fixed monthly contribution

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