Recipes of Retirement

A retirement plan also a pension plan is a sort of life insurance plan that helps you create a regular flow of income even after retirement in the form of a pension. 

A good pension plan constitutes

1. Helps you keep up with the living standard. 

2. Beats Inflation easily.

3. Keeps your investment safe.

4. Covers all post-retirement needs.

If you want to have a comfortable and peaceful retirement, your retirement portfolio should have one or more of the following ingredients.

Few quick points to note down before we walk you through the various types of retirement plans below.

1. Income Tax Relief.

As per section 80CCC of the income tax act, 1961, a deduction of ₹1.5 lakhs is applicable on investment in pension plans such as ELSS funds, tax-saving fixed deposits, PPF (Public Provident Fund), etc.

2. Monthly expenses

Monthly expenses are one of the main factors to consider before and while purchasing any saving schemes or plan to invest in retirement plans and policies.

3. Inflation

One should factor in the growth rate of inflation and thus plan and invest accordingly inappropriate schemes. 

Few other points to keep in mind. 

4. Life expectancy

5. Medical expenses

6. Assets and loans

What is an Annuity?

An individual can make two types of payments to a financial institution —either lump-sum payments or a certain pre-decided amount at regular intervals of time. A part of the deposit is repaid annually, half Yearly, quarterly, or monthly. More on Annuity in the later part of the article. 

It is always a good idea to consider consulting a financial advisor. Read on to know about such retirement saving schemes and select the one that suits you best.

1. Atal Pension Yojana (APY)

This is a robust and effective retirement plan or saving scheme initiated by the

government. The plan is designed for the welfare of the weaker section.

One of the main advantages of the scheme is premiums are low and benefits are high.  

This is a voluntary retirement scheme best suited for middle- and low-income individuals between 25-40 years of age.

The second plus point of the scheme is government contributes 50 percent of the deposit for five years. 

Just like any pension the individual start getting the benefits or proceeds after 60 years. 

 The subscriber of the plan can opt for the monthly pension amount receivable in Rs 1,000, Rs 2,000, Rs 3,000, and Rs 5,000 slabs. 

2. Employee Provident Fund (EPF) 

Another government-initiated saving scheme was introduced by the Employee Provident Fund Organization (EPFO) for salaried professionals. Here an individual being prudent starts saving way early in the career and they do so consistently with the focus on retirement. 

As per the salary structure, both the employee and the employer make an equal contribution, a fixed amount to the EPF a mandatory retirement savings scheme.

The corpus invested is released only on retirement. Partial withdrawals are allowed if need be. This is again a retirement-focused fund that also provides tax benefits.

3. Public Provident Fund (PPF)

This plan was made for both salaried and non-salaried individuals. The subscriber of the plan can contribute to the retirement funds while reducing taxation. 

The tenure of the Public Provident Fund is 15 years and after a fixed number of years, partial withdrawals are also allowed. 

4. Voluntary Provident Fund (VPF)

Under this scheme the monthly contribution is fixed but along with the bonus and other incomes if an individual wish to contribute higher amounts can easily do so. The amount of withdrawals after five years is non-taxable.

No may wonder out of EPF, VPF, and PPF – which one is better suitable?

All three have similar structures whereas the following points stand out.

 The voluntary Provident Fund allows individuals to add extra money. Despite a lock-in period, flexible withdrawals are allowed under this scheme. 

5. Recurring Deposits (RD)

As the name says the depositors of this plan as per their wish for a pre-chosen term period deposit a fixed amount monthly in a bank. The returns at maturity if the term is long are quite handsome. 

Senior Citizens` have the advantage of higher interest rates which also be used as collateral for taking loans.

6. National Pension Scheme (NPS)

NPS is like a combo of a bank account and mutual fund introduced and managed by the government of India.

 This is a voluntary retirement scheme available to all Indian citizens (resident or non-resident) between 18 and 65 years old. 

It is important to note that the maturity proceeds (including the principal portion) of this retirement savings plan are not tax-free and this makes the plan less lucrative.

The money deposited by the subscribers is used in making investments in equity and debt funds to generate returns on the investment. 

Partial withdrawals after one complete five years are allowed. 

7. More On Annuity

1. Deferred Annuity

Here premiums can be paid even daily which will save a significant sum of money as a pension over the lifetime of the scheme. In addition, the built-up corpus invested is tax-free. 

  2. Immediate Annuity

As soon as the individual deposits a pre-decided lump-sum pension begins right away every month. Under the Income Tax Act of 1961, the premiums are tax-free. In case of a policyholder’s demise, the nominee receives the deposited money.

8. Senior Citizen Savings Scheme (SCSS)

This least risky top-notch saving scheme focuses on minimizing tax and offers regular income for a tenure of five years. This scheme can be availed in Post Offices and certified banks of India.

Along with the senior citizens (60 years and above) individuals between 55 to 0 years of age who have opted for the Voluntary Retirement Scheme, or Superannuation can also invest in this scheme.

The interest rate applicable from the first quarter of 2023 is eight percent for a minimum of Rs 1,000 and a maximum of Rs 15 lakh that can be invested in the plan. Interest is paid quarterly. Premature withdrawals are allowed but attract a penalty.

9.Pradhan Mantri Vaya Vandana Yojana

PMVY is an insurance policy-cum-pension scheme provided by Life Insurance Corporation (LIC) for the security of senior citizens. 

Just like SCSS, a senior citizen can invest up to Rs 15 lakh, and a guaranteed interest of 7.4 percent (monthly, quarterly, semi-annually, or annually) for 10 years is paid on the deposited amount.

 The policyholder can opt for an annual pension of a minimum of 12,000 to a maximum of 1,11,000 on a deposit of Rs 1,56,658 and 14,49,086 respectively. 

10. Varishtha Pension Bima Yojana – VPBY

Life Insurance Corporation of India (LIC) offers the Varishtha Pension Bima Yojana scheme for senior citizens and guarantees a rate of 9% per annum (payable monthly) on lump sum deposits.

11. Indira Gandhi National Pension Scheme

Again, a Central Government backed up a plan that provides full support for senior citizen states and union territories of the country who fall under the below poverty line (BPL) category. 

12. Life ULIP Plan

The investment made under this plan is used to provide life cover and the remaining is parked in Equity and Debt Funds. Therefore, returns under the Unit Linked Insurance Plan depend entirely on the market conditions, and the risk of investment is solely borne by the Policyholder.

13. Pension Funds

Pension Funds are popular among investors. returns are higher as compared to the other retirement plans because these Funds usually have a large amount of money invested.

Here is the list of the top 3 Pension Plans in India in 2023  

LIC New Jeevan Shanti Plan 

HDFC Life Click 2 Retire 

SBI Life Saral Retirement Saver 

14. Mutual Funds for Retirement in 2023

Mutual Funds are more adaptable and flexible. Despite of little risk involved these are lucrative investment funds managed by professionals. 

Factors You Should Know Before Investing 

• MF is Transparent

• You Can Avail of Tax Benefits

• MF is Extremely Flexible

Here is a list of top Performing Retirement Mutual Funds of 2023

1) HDFC Retirement Savings Fund 

2) ICICI Prudential Retirement Fund 

3) HDFC Retirement Savings Fund 

Your someday is here. You should be happy and tension-free in your retirement life and it should also be the best part of your life. After a career spanning multiple decades to wish and plan a retirement that is sensible and yet flexible enough to include a fun part of life is only prudent and thoughtful. They say, “Retirement is the world’s longest coffee break”; so select a plan and enjoy your cuppa coffee and enjoy your days of sleeping late and doing nothing! All the best in your retirement.