Types of Retirement Plans

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Types of Retirement Plans

  • 22nd Nov 2021
  • 61

View Plans Types of Retirement Plans

Types of Retirement Plans

You work hard every day to live your life in luxury, but with your current plans and lifestyle choices you make, you should also consider how you can enjoy your life when you no longer have a disposable income to enjoy your retirement. Typically, the retirement age is 60 years; however, you can or may want to take voluntary retirement whenever you wish to. To prepare for retirement, it is suggested that you start planning early and invest in post-retirement plans, tools of investment that help create a retirement fund and give returns in the form of regular income once you retire.

Post Retirement Plans: A Boon for After-work life!

The importance of after retirement plans cannot be emphasised enough. You must reap and enjoy maximum retirement benefits, and to do so, you must invest in a retirement plan. There are different types of retirement plans, each with its features and benefits. Not just this, but retirement plans also come with various tax benefits. Thus, creating a corpus will help you support yourself and your loved ones from the regular income that you will get from these plans.

Types of Retirement Plans

The types of retirement plans are as follows:

1.Insurance Based Plans

Insurance-based plans are post-retirement plans bought directly from the insurance company. They are also known as personal pension plans since there is no involvement of an employer or a government body in purchasing the plan. Such plans have both death benefits and retirement benefits.

Insurance-based after retirement plans can be categorised as deferred annuity plans, immediate annuity plans, pension plans with cover, and pension plans without cover.

  • Deferred Annuity Plan
  • These retirement plans help create a retirement fund by investing a lump sum or a premium, which you can only access after a certain period specified in the plan. In addition, such plans further invest your money in low-risk debt plans or equities; the choice lies with you.

  • Immediate Annuity Plans
  • Under this plan, you invest a lump sum, which you can withdraw at any time and do not have to wait. If you have a big sum lying with you, such a plan is for you.

  • Pension Plans with or Without Cover
  • These are relatively simpler plans. As the name suggests, the former comes with a life cover, and the latter without a life cover.

2.Employment-Based Retirement Plan

If you are working as an employee in some company, your employer will set up a retirement plan. Under such after retirement plans or employee pension schemes, an amount is deposited from both ends - a share from your salary and the remaining added by the employer to create retirement benefits for you. Employees provident fund (EPF) is one such employment-based plan, where both the parties make an equal contribution to the plan. Under this scheme, anyone over the age of 54 can withdraw 90% of their savings.

3.Public Provident Fund

This is a government initiative where one can buy the plan from a Pension Fund regulatory and developmental authority recognised organisation. A PPF helps build a retirement fund by the regular payments that will be made by you. Every year you can invest a minimum of Rs. 500 to a maximum of Rs. 1,50,000 for the tenure of the fund, which is 15 years. Once your tenure is over, you can extend it by five years as many times as you want. A PPF also comes with tax benefits under section 80C of the Income Tax Act. One benefit under this scheme is that you can withdraw small sums after seven years of your tenure.

4.National Pension scheme

This is a government-based plan (in tier 1) with tax benefits and withdrawal allowed only after ten years of investing, which is the maturity period. Such an after-retirement plan allows only 40% of withdrawal, and the rest is given as regular income. Tier 2, on the other hand, comes with more flexibility in taking your money out and is not exempt from tax.

These plans come with their retirement benefits, which you must know and understand before choosing one. However, a personal or government-based plan is usually suggested. Protecting your future in more ways than one is always beneficial, so analyse your needs and goals and make a well-thought-of decision!

- A Consumer Education Initiative series by Kotak Life


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