With every passing year, the life expectancy of people all over the world continues to rise. In India, there are already a high number of senior citizens. It is common for many people today to live up to the age of 90 years! This means that with increased longevity, there is a need to create infrastructure, jobs and retirement schemes aimed at the aging population.
Since it is possible that one may live to a ripe old age, it is important to start planning for a safe and happy retirement from now on. To this end, many people choose to buy pension plans in India. These pension planners are protection plans that offer good returns for one's retirement years.
How to choose the right pension plan
Before finalizing the pension plan that you wish to buy, consider the following questions:
What is the age of retirement you seek?
You need not wait till you are 60 years old to retire. A pension plan gives you the freedom to retire much earlier, even at age 45.
Do you need a pension plan?
If you are employed by the Government, you will receive a monthly pension post your retirement at age 60. But if you are employed in the private sector, you will receive your dues, gratuity and leave encashment when you quit your job, with no pension thereafter. If you do not have adequate savings or investment, you will need a pension plan.
How much money do you require once you retire?
Your pension plan must provide you with enough money to run your household expenses comfortably. Take stock of your finances and calculate your projected monthly spends after your retirement. Factor in inflation as well. This figure is the expected pay-out of your pension scheme.
Which kind of plan do you prefer?
There are two types of pension plans: Immediate Annuity and Deferred Annuity. Under Immediate Annuity, you pay a lump sum amount and the policy immediately begins the pay-out from the next month. Under Deferred Annuity pension policy, the amount is accumulated over a number of years till the policy holder retires. The pay-outs begin thereafter. As the policy holder, you can choose the frequency of pay-outs: monthly, half yearly or annually.
Which other schemes can you try simultaneously?
You can invest in a PPF account that will invest your money for a period of 15 years and give interest at the rate of 8 to 9% (it is revised per year). Or you can also create a bank fixed deposit or invest in Government schemes such as Kisan Vikas Patras.