Recognize The Different Types Of Retirement Plans

Retirement plans, often known as pension plans, are important tools for obtaining monthly income on a regular basis after retirement. For government employees, there are systematic and well-designed retirement schemes in place to provide them with post-retirement pension income. Employees in the organised or private sectors can obtain a pension after completing a specified period of employment under the Employee Pension Scheme (EPS). Furthermore, if you want to make your life easier after retirement, you may combine your retirement plans with an insurance coverage. The page provides information on several types of retirement plans.

Know the Various Types of Retirement Plans

The following are some of the most common forms of retirement investing solutions:

Unit Linked Insurance Plans (ULIPs)

Secure investment alternatives, such as government securities and debt. Individuals with a higher risk tolerance and aggressive investors, on the other hand, can invest in pension plans that invest a considerable portion of their money (premiums paid) in high-risk choices such as equities, bonds, money market funds, and non-government assets. These are known as ULIPs, or Unit Linked Pension Plans.

National Pension Plans (NPS)

The National Pension Scheme, or NPS, is a pension plan mandated by the Government of India (GOI). It is a social security plan in which employees from various industries are supplied with assistance until they reach the age of 60 or older. Individuals can invest in NPS during this time period and withdraw up to 60% of the total collected amount when they reach the age of 60. The remainder is distributed as a lifetime pension in the form of annuity payments.

Traditional Pension Schemes

There are four plan alternatives in this category: a conventional pension plan, a pension plan with immediate annuity payments, a pension plan with life cover, and a pension plan with delayed annuity payments. Let's take a closer look at each of the alternatives:

1. Regular Pension Plan: Under this plan, the full amount set aside by you is invested, and at the conclusion of the period, you receive the corpus as well as the interest gained. If you die before the end of the plan's term, the nominee will get the corpus as well as the interest earned up to the time of your death.

2. Pension Plan with Immediate Annuity Payments: This plan allows the policyholder to start generating an income the following month after making an investment. It is analogous to receiving monthly interest income from a fixed deposit in a financial institution such as a bank.

3. Pension Plan with Life Coverage: Under this plan, a portion of your money is set aside for paying a premium in order to cover your life via a term plan for a sum assured. Term insurance premiums are often cheap. As a result, under this plan, the nominee assigned would get the sum promised if you died before the end of the plan's lifespan.
In addition, the nominee would be entitled to the accrued amount from the start of the plan until death.

4. Pension Plan with Deferred Annuity Payments: Under this plan, the policyholder can accrue corpus by paying premiums throughout the plan's term. By the conclusion of the plan's term, the premium paid and collected interest have added up to a sizable corpus. In most cases, a pension plan with delayed annuity payments is combined with a life insurance policy.

Take Away

If you want to retire within the next 10 to fifteen years, consider taking these steps now to ensure that you have all you need to enjoy a comfortable retirement lifestyle. Analyzing your sources of income well in advance of your intended retirement date helps you to make any necessary modifications in the distribution of cash, whether for your healthcare, travel plans, paying school and/or marriage, and so on.

Also read: Increasing Your Understanding Of The EPF And Its Importance

Features, Advantages, Eligibility of the Post Office Monthly Income Scheme