retirement plan

India has been enjoying a unique demographical advantage over the past few years – the advantage of a younger population. Two-thirds of India’s population is roughly around the 30-35 age gap. And as per a recent study done by the World Economic Forum, India will have one of the largest retiree population by 2050. But it predicts that our savings, the government sponsored pension scheme and the mandatory employer pension plans will be insufficient to cover our retirement costs by then. A major chunk of our population is employed in the informal sector with no access to retirement plans and minimal savings for the future. Investments do seem to be on the rise but so do the risks involved with it. Add inflation to this unstable mix, and you have a disaster that doesn’t spell well for a comfortable retirement.

Clearly, the need for retirement plans is more evident now than ever. But the concept is riddled with myths and ignorance. So, for better understanding, let us break it down for you.

What are retirement plans?

A retirement plan is an arrangement that provides you with financial security after you retire, in exchange of premiums paid through the term. These premiums depend on the rates of the policy and are then used for investments by the insurance company to maximize your returns. So, when you get your corpus, you get your savings coupled with the profits made from the investments.

There are different types of policies available in the market that provide varying levels of cover. If you are not sure about the corpus amount or the term duration, you can use a retirement plan calculator. A retirement calculator helps you predict a rough amount you should be saving every month to have a decent corpus by the time you retire. They’re available online and all insurance companies provide you with this service.

Benefits of starting a retirement plan early:

• Long-term savings
• A steady income every month after you retire, if you opt for it
• Offers life insurance cover with pension
• Protects you from inflation by investing part of your corpus to ensure a regular cash flow