The Various Types Of Retirement Plans
Updated On Jul 10, 2022
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Retirement plans, often known as pension plans, are crucial strategies for earning regular monthly income after retirement. There are structured and well-designed retirement programmes in place for government employees to provide them with post-retirement pension income. Employees in the public or private sectors can get a pension after completing a certain length of service under the Employee Pension Scheme (EPS). In addition, if you want to simplify your life after retirement, you can combine your retirement plans with insurance coverage. The article contains information on several types of retirement plans.
Different Types of Retirement Plans
The following are some of the most common forms of retirement investing solutions:
Unit Linked Insurance Plans (ULIPs)
Government securities and debt are safe investing options. Individuals with a higher risk tolerance and more aggressive investors, on the other hand, can invest in pension plans that allocate a significant amount of their money (premiums paid) to high-risk investments such as shares, bonds, money market funds, and non-government assets. These are referred to as ULIPs (Unit Linked Investment Plans).
National Pension Plans (NPS)
The National Pension Scheme, or NPS, is a government-mandated pension scheme in India (GOI). It is a social security programme that provides help to employees from various businesses 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 money acquired when they reach the age of 60. The balance is paid out as a lifelong pension in the form of annuities.
Traditional Pension Schemes
In this category, there are four plan options: a traditional pension plan, a pension plan with immediate annuity payments, a pension plan with life cover, and a pension plan with delayed annuity payments. Let us take a deeper look at each of the options:
1. Regular Pension Plan
Under this plan, the entire money set aside by you is invested, and at the end of the time, you receive both the corpus and the interest earned. If you die before the plan's term expires, 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
After placing an investment in this plan, the policyholder can begin earning money the next month. It's similar to earning monthly interest income from a fixed deposit in a financial institution like a bank.
3. Pension Plan with Life Coverage
A part of your money is set aside under this plan to pay a premium in order to insure your life via a term plan for an amount promised. Term insurance rates are frequently low. As a result, if you died before the end of the plan's lifespan, the nominee assigned would get the money guaranteed. Furthermore, the nominee would be entitled to the accumulated sum from the plan's inception until death.
4. Pension Plan with Deferred Annuity Payments
The policyholder can accumulate corpus under this plan by paying premiums during the plan's duration. By the end of the plan's life, the premiums paid and interest earned had amassed a large corpus. A pension plan with delayed annuity payments is usually linked with a life insurance policy.
Take Away
If you want to retire within the next 10 to 15 years, consider taking these actions now to ensure you have all you need to live a pleasant retirement lifestyle. Analyzing your sources of income well in advance of your anticipated retirement date allows you to make any required changes in cash distribution, such as for healthcare, travel plans, paying for education and/or marriage, and so on.
Also Read: What's the Difference Between an NPS Account and Mutual Funds?
