Saturday 22 June 2024
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6 Benefits of Investing In Pension Plans

6 Benefits of Investing In Pension Plans

We all need to invest for our future, especially for our old age. One need to start saving up a portion of money and investing it in Pension Plans or Retirement Plans while one is still young and is at the prime, professionally speaking. The idea behind a pension plan is to enable a regular income flow after your retirement and give you a sense of financial stability. In our country there are two stages to pension plans – first stage is the accumulation stage, in which you as an investor will pay annual premiums till you reach retirement age. The second stage is the vesting stage, which is when you retire and start receiving the annuities till the time of your death or the death of your nominee.

But the benefits of a pension plan exceed beyond the obvious financial security of your old age. There are also certain benefits of Pension plans as an investment option, since the contributions that you make are tax-exempt up to Rs. 1.5 lakh under Section 80CC.

Along with that, there are also some other advantages of investing in Pension Plans. Here are some of the advantages of opting for a Retirement investment plan which help you know how to retire early:

  • Investment Options: Pension plans provide you with the option of investing in either debt and equity investments, or else government securities, based on the analysis of their risk profile. Any risk involved is, of course, balanced out by the returns generated by the investment.
  • Long-Term Savings: Retirement Plans serve as sturdy long-term savings option. The savings is guaranteed, whether you make multiple payments of smaller amounts or you choose to give lump sum payments. These plans create an annuity that can not only be invested further but also provide you with a steady income stream after your retirement.
  • Access during Emergency: The good thing about Pension policies is that they can be adjusted and tweaked to access the lump sum payout in case of an eventuality or an emergency. You can also cover your long-term health care in this way.
  • Choice in Payment: Pension plans give you the choice in how you want to get paid. On the basis of your age or your requirements, you can either choose to a deferred annuity plan that will enable your corpus to get more interest until your payouts begin, or you can choose to invest a lump sum amount and receive annuity payments right away.
  • Diminishing the Effects of Inflation: Investing in Pension plans can be a smart way to diminish the effects of inflation. These schemes pay you a lump sum amount when you reach retirement which is a maximum of 1/3 of the accumulated corpus, and rest 2/3 of the corpus is used to generate steady income stream. To calculate your future retirement corpus, you can use an online retirement calculator or turn to a trusted financial advisor.
  • Life Insurance Cover: Pension policies also double as a life insurance cover. Some plans even give you a lump sum amount when you reach the age of retirement, or in case of your demise – depending on whichever occurs earlier.

These are just some of the benefits of investing in pension plans. Get started with your retirement planning today.