You work hard in order to achieve your dreams and it is important that you ensure that your life post-retirement is also financially secured. You can purchase a pension plan if you want to ensure that you are not dependent on anyone after you have retired from your job and in case you still have any financial dream that you want to achieve. We will have a look at how pension plans can be a suitable option for you keeping in mind your long-term goals.
Features and benefits of pension plans
Some of the features and benefits of having a pension plan are:
- Long-term saving option: Investing in a pension plan can be a long-term option. Pension plans, unlike endowment plans, help in creating an annuity which can be further invested in various other investment tools to help you build wealth.
- Guaranteed income: A Pension plan as the name suggests, ensures that you receive a steady flow of income after you have stopped working. This ensures that you are not financially dependent on anyone else and completely capable of taking care of your partner and yourself, post retirement.
- Liquidity: One of the advantages of purchasing a pension plan is that under some policies you are allowed to withdraw a certain sum of money during the accumulation stage. This ensures that in case there is any sort of financial emergency, you have a back-up to fall upon and ensure that you do not have to borrow money from a third party.
- Provides different options: If you purchase a pension plan, you can choose how you would like to invest and receive the annuity payments depending on your financial capabilities, and long-term goals. For example, you can pay a lump-sum amount and start receiving the annuity amount on an immediate basis. Otherwise, you can go with a deferred annuity plan where you allow the corpus to grow and earn more interest over a period of time.
- The effect of inflation is negated: One of the advantages of purchasing a pension plan is that it allows you to negate the effect of inflation. Under a pension plan, you receive one-third of your corpus as a lump-sum amount immediately after the inception of the policy, while the rest of the two-third amount is paid as a periodic payment to you. This allows you to ensure that regardless of the inflation, you are able to take care of your financial requirements.
- Tax benefits: You get to enjoy various tax benefits on purchasing a pension plan. The contributions made by you towards the pension plan allow you to enjoy tax exemptions under Section 80C, Section 80CC, and Section 80CCD of the Income Tax Act, 1961.
It is important that before you purchase a pension plan for yourself, you properly evaluate your insurance and future financial needs. You must also compare the various pension plans available in the market and only then purchase a pension plan which you feel will be suitable for you.