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Understanding The Working of Pension Plans

Published On Jan 03, 2022 10:00 AM By InsuranceDekho

The Public Provident Fund (PPF) is one of India's most popular retirement savings plans. When you start putting money into your retirement fund early in life, the money grows over time to offer a financially secure golden year. With a well-designed retirement plan, compounding can help you outperform inflation.

Everyone should invest in pension plans to provide financial security when they retire. Section 80C of the Income Tax Act of 1961 covers a variety of retirement programmes, allowing taxpayers to deduct up to Rs.1.5 lakh in taxes. Your investment objectives must be met by any plan you choose (or retirement plans). If you plan to retire early, your savings should be sufficient to keep you afloat during your golden years. As a result, it's vital to pick a retirement plan carefully.

Investing In Retirement Plans Has A Number of Advantages

The following are some of the reasons why retirement plans are necessary:

1. Makes It A Habit To Save Money

A retirement plan, often known as a pension plan, is a structured approach to building a fund to cover post-retirement needs. In order for your retirement plan to stay active, you must pay your premiums on time. Regular premium allocation ensures that you save the needed amount on a regular basis, allowing you to retire worry-free and financially secure.

Both traditional and unit-linked retirement plans are available. Investors can select a portfolio based on their risk tolerance, which can range from aggressive to balanced to cautious. It enables you to save for retirement while also ensuring your family's financial stability. Paying a top-up payment on a unit-linked retirement cum insurance plan with an increase in income can help to grow savings.

2. Income Protection For Husbands And Wives

If your spouse relies on you financially after you retire, you must ensure that they maintain the same quality of living while you are gone. In order for this to happen, you'll need to choose a term plan that lets you choose how you wish to receive your death benefit.

3. Benefits of Lowering Costs

Last but not least, make sure it's on your term schedule. You want to save as much money as possible on taxes because your investment alternatives are limited in your 60s (you cannot invest in high-risk options).

As a result, tax benefits should be included in your term plan in order to reduce your tax liabilities while increasing your revenues. The amount guaranteed to your nominee should be tax-free, as part of your insurance policy.

4. Medical Coverage

The age of a person has a big impact on medical insurance premiums. The price of health insurance rises as a person gets older. It is thus recommended to purchase senior citizen medical insurance early in order to save money on premiums.

5. Loans And Debt

If someone takes out a loan and then dies suddenly, the looming debt can be devastating to the family, particularly if he or she was the primary source of income. If you leave a debt for your spouse and children to pay off, it's hardly the best way to be remembered. The family will be debt-free if they repay the loan with the money they will receive after the deceased passes away.


By acquiring a term insurance policy for your spouse, you can be confident that even if you are no longer living, he or she will be able to meet his or her goals and aspirations.

Do read - FAQs Associated With Pension Plans

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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