Benefits of Purchasing Retirement Plans

Who doesn’t want to have financial stability in both the working and retirement phases of their life. The Retirement Plan focuses on taking care of post-retirement financial costs with the benefit of accrued funds. A standard premium retirement account creates a cash corpus that will be used to grant you pension money to enjoy the same financial freedom in the post-retirement period.The retirement plan also provides the family with a death benefit in the event of an accidental and untimely death of the life insured.

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Benefits of Purchasing Retirement Plans

There are many advantages of retirement preparation, ranging from physical to emotional and psychological. Let's look at these common reasons why you might benefit from retirement plans

1. Guaranteed Pension/Income

Under a retirement plan you will receive a fixed and regular income after you retire (deferred plan) or immediately after you start investing in a retirement plan (immediate plan), this solely depends on what type of retirement plan you choose to invest in. Purchasing a retirement plan will help you ensure a financially independent retirement phase of your life. 

2. Tax Benefits

Some retirement plans provide tax exemption under Section 80C of the Income Tax Act, 1961. If you intend to purchase a retirement plan, the Income Tax Act, 1961, provides a substantial tax respite under Chapter VI-A. Section 80C, 80CCC and 80CCD specifically describe the tax exemptions in full details. For example, the Atal Pension Yojana (APY) and the National Pension Scheme (NPS) are subject to tax deductions under Section 80CCD.

3. Liquidity

Retirement plans are basically a low-liquid commodity. However, some plans encourage withdrawal even during the accumulation phase. This will ensure that funds are recovered during desperate situations without having to rely on bank loans or other financial criteria.

4. Appreciation of Savings

A potential buyer may either opt to pay the premium at regular intervals or at once as a lump sum investment. Around the same time, the capital would compound over time and build up a large corpus. For example, if you start investing at the age of 30 and continue investing until you turn 60, the accumulation time would be 30 years. Your pension for the time you have selected comes largely from this corpus.

5. Distributed Payment To Ensure Long-Term Financial Stability 

People sometimes mistake the payment period with the time of accumulation. This is the phase in which you will earn your pension until retirement. For eg, if one gets a pension from the age of 55 to 75 years, the payout period would be 20 years. Most plans keep this away from the accumulation period, but some plans still allow partial/full withdrawals during the accumulation period.

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Take Away

Every person should invest in retirement plans to ensure they have a financially independent retirement and post-retirement period of their life. Retirement plans help you plan a better and financially fit future for yourself, you can live worry free without compromising your standard of living even when you are not working. With retirement plans you can build a corpus to fulfil your future financial requirements.