For your golden years to be pleasant, the quantum of retirement fund should be such that the returns generated from it can cater to your monthly expenses. In India, retirement planning is synonymous with buying pension plans. However, there are several other options available.
Pension plans
Pension plans are offered by a variety of life insurance companies. On maturity, the corpus accumulated is invested for generating a regular income stream, which is referred as pension or annuity.
Pension plans are also classified as 'immediate annuity' plans and 'deferred annuity' plans. An immediate annuity plan is where you make a single premium payment and from the subsequent year, your pension payout starts.
Deferred annuity is where the premiums are paid (either as single or regular payment) and the payout is 'deferred' up to a time, which is decided upon by the policyholder. The period between the start of policy and vesting is called the deferment period. One has the option of withdrawing one-third of the maturity amount at one go, but the remaining amount has to be compulsorily invested in an annuity (paid out in regular instalments). As of now, the maturity value from pension plans are taxable, but that will change with the advent of the Direct Taxes Code.
Ulips
Unit-linked insurance plans have caught the fancy of investors, especially those built to last like whole-life endowment plans. These plans provide life cover until 99 years and one can withdraw systematically from these plans. In the case of traditional plans, they have an inbuilt payout mechanism and one can utilise the payouts towards pension.
Such plans could work well over the long haul. A suggested tenure for traditional plans would be 15-plus years and for 10 for Ulips. This avenue is tax-efficient; the payouts are tax-free and the premium paid also qualifies for tax benefit under Section 80C of the Income Tax Act with a maximum limit of R1 lakh.
Mutual Funds
Equity mutual funds. Equity investments over the long term turn out to be extremely fruitful. Keeping out of equities could make your portfolio extremely conservative and the returns could go negative once inflation is factored in.
Debt mutual funds. These should be typically used for emergencies. However, one can also invest returns accruing out of maturity/profit booking from equity MFs into debt funds. One can conduct systematic withdrawals from debt MFs towards pension.
Gold MFs/ETFs. While gold can provide the much need balance to the portfolio, one should hold not more than 10% exposure in this asset class.
Reverse mortgage
In a reverse mortgage, retirees can pledge a property they already own (with no existing loan on it). The bank in turn gives them a series of cash flows for a fixed tenure. The homeowner's obligation to repay the loan is deferred until the owner dies, the bank bears the risk that the outstanding will exceed the market value of property then, and will not ask for the difference from the heirs.
A balanced approach is important for retirement planning and maintaining the risk profile at 'moderate' levels is vital
Source: http://www.financialexpress.com/news/mutual-funds-can-help-build-your-retirement-kitty/882181/0
--
___________________________________________________________________________________
'I made my money by selling too soon.'
Website: http://indianmutualfund.co.cc/
Blog:http://indianmutualfund.wordpress.com/
___________________________________________________________________________________
No comments:
Post a Comment