When Is The Right Time To Invest In A Retirement Plan?
Published On Apr 13, 2021, Updated On Apr 26, 2021
Table of Contents
- Benefits of a Retirement Plan
- Reasons You Should Start Planning For Your Retirement Plan Today
- 3 Key Phases of Retirement Plan
Like every other planning, retirement planning also needs to be done beforehand. With the average work life being somewhere between 30 and 35 years of age, the best retirement plans are often started at an early age. This means that retirement planning and execution happens across different life stages. When done right, you shall enjoy the fruits of the retirement plan set in motion years ago. Following are some of the benefits of retirement planning.
Also Read:- Reasons Why You Should Purchase Retirement Plans
Benefits of a Retirement Plan
The benefits of a retirement plan are below-mentioned:
1. Safe and Reliable Income
Life insurance pension plans offer the safest and most reliable long term pension income.
2. Wealth Boosters
Several Retirement plans like Guaranteed Savings Plan and Invest 4G include bonus units and return to long term investor’s portfolios.
3. Loyalty Additions
Another form of bonus adds to your portfolio if you stay invested for more than 10 years.
4. High Liquidity
You can withdraw funds even without breaking or surrendering your pension plan in the times of need.
5. Automated Portfolio Strategies
Use automated portfolio management to benefit from equity funds while you are busy at your work.
Reasons You Should Start Planning For Your Retirement Plan Today
Following are some reasons why you should start planning your retirement plan from today itself-
1. Cheaper When Younger
Retirement plans offer dual aspects of both an insurance and an investment. When you are at a young age the body is less prone to diseases which reduces the risk for the insurer. Since insurance is a business of risk assessment, the premiums are generally lower for young policy buyers.
When you leave an investment to accumulate for a longer period of time, the interest earned on the investment too starts to generate returns. This leads to rapid accumulation of the amount and the corpus grows exponentially. When you begin to invest early, compounding assists in multiplying the investment.
3. Course Correction
All market-linked investments are very risky. When you start investing early you have enough time to monitor the performance of the investment and make necessary portfolio adjustments.
3 Key Phases of Retirement Plan
The different phases of a retirement plan are as follows-
In the first stage of retirement planning, you have to contribute regularly to the retirement plan. The premiums have to be carved out from the monthly income. The corpus available to you after retirement will depend solely on the number of contributions made to a retirement plan during the accumulation phase.
2. Preservation Phase
Your expenses shall change dramatically with age. The change in lifestyle fuels an increase in expenses as one nears their retirement. The preservation phase kicks in 10-15 years before retirement. In the preservation stage, you are able to make a better analysis of your post-retirement requirements. Taking the required fund in an account, conduct a thorough review of the existing investments.
3. Distribution Phase
The distribution phase starts after your regular income stops. This is the final phase of retirement planning where the fruits of the decades long labor ripen. In this phase, you start receiving monthly income from the pension plan to support the post-retirement expenses.
Must Read:- Retirement Planning Guide For Working Women