How to Choose the Right Pension Plan for You?

There seems to be nothing as blissful and soothing as finally being able to retire, right? It is that one time of your entire life when you can just do what you want. These may include the hobbies you wish to pursue, reading, spending time with near and dear ones, travelling, getting involved in community service, or even starting something of your own. However, retirement can only be free of stress and turmoil if you are financially sorted.

Now, in this case, pension plans are something of a godsend, helping meet your financial requirements seamlessly after you retire. How to choose the best one? Here’s the lowdown below.

What are Your Financial Objectives?

Right before you sign on the dotted line of any pension plan, a few things should always be clear to you. These include the costs that you will have to cover down the line and also the lifestyle that you will lead once you retire. This will give you a picture of the money that you need. You can use this point of view to look for suitable pension plans that will help you accomplish these objectives.

Just to take an example, you can always opt to accumulate money over a prolonged duration and then get it as a pension income after you retire. You can also choose to invest a large sum of money that you receive at retirement into a pension plan. In such cases, the annuity will begin immediately once you make the investment.

Check the Available Plans

Some of the pension plans available can be summed up below:

Deferred Annuity: This means a policy where you can build up your corpus for retirement steadily. Thereafter, up to 60% of the corpus can be withdrawn as a lump sum, and the remainder must be used to purchase an annuity plan, as per current Indian regulations (PFRDA).

Immediate Annuity: This is often a convenient option for those who are close to retirement. Once you get a big lump sum payout, you can use it to invest in these plans. They will start giving you regular pension income immediately.

Future Costs and Your Risk Appetite

When planning retirement, your consideration should also be based on future expenses and your risk tolerance. For instance, medical expenses are expected to rise with age so you need to make sure your pension plan offers sufficient coverage.

Also, consider where you are on the risk tolerance spectrum. You might want to opt for a traditional pension plan with its guaranteed returns if you're risk averse. Yet, in case your risk appetite is on the higher side, then unit-linked plans may be better choices.

Conclusion

Evaluate your financial goals, and weigh the different considerations, to see which plan fits into your future needs and risk profile. Ultimately, retirement should be about living life not worrying about how to pay for it so invest in pension plans with careful consideration.

This post first appeared on The Kashmir Pulse