What is Retirement Planning? Top 3 Retirements Plans

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Although you may not consider retirement as your top priority, especially during your mid-career, it’s certainly something that you need to determine in your life someday. If you want to spend your old age without any financial roadblocks, you need to make a plan in your early life.

Planning a retirement plan is a comprehensive process of assessing your income goals after your retirement and determining the decisions and actions required to achieve your post-work financial goals. It includes processes like identifying income sources, setting up a savings program, and sizing up expenses.

You also need to estimate your future cash flows to determine whether your stated income goals will be achieved or not after your retirement. Generally speaking, it’s a life-long process that can be started at any point in your career.

However, it’s always wise to add retirement planning to your financial priority list to make the most out of it. With a proper retirement plan, you can ensure that you have a safe, fun, and secure retirement. Here’s everything you need to know about retirement planning

Retirement Planning – Things You Must Consider!

There are many more factors involved in Retirement Plans than just determining how much you need and how much you save. It includes a complete financial picture of your lifestyle that makes you live happily in your retirement days. Here’s a list of factors that you must consider in a retirement plan:

1. Estate Planning

Estate Planning refers to determining what needs to be done with your assets after you’re deceased. It involves a legal will that states your plans, but you need to make sure you have a strategy that protects your lifelong earnings from estate taxes before you get one made for yourself.

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2. Insurance

The most significant component of retirement planning is to protect your assets. With growing age, you will notice a significant increase in your medical expenses. Moreover, you’ll also have to visit medical bodies very often in your retirement life.

This makes it an important task to get health insurance for your future well-being. Many people feel that the national medical protection system doesn’t offer adequate coverage, and that’s why they look for third-party insurance providers to supplement their long-term healthcare.

There are several types of policies that resonate significantly with retirement planning. For instance, an Annuity is an insurance policy that resembles a pension a lot. The insurance company asks you for a deposit that’s paid later to you monthly.

3. Tax Efficiency

When it’s almost your time to retire and start taking distributions, you’ll find taxes to be one of the biggest hurdles against a fulfilling retirement. The majority of retirement accounts are taxed similarly to ordinary income tax that needs to be paid upon withdrawal.

If you believe you can make more money in the future, you can certainly proceed with the Roth conversions. Moreover, make sure you consult a financial planner or accountant to help you understand all the tax considerations required in retirement planning.

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4. Home

The majority of Indians still believe their home is the single biggest asset they own in their lives. However, you may wonder what it has to do with retirement planning. A home was considered a plain asset in earlier times, but home loans changed everything.

With the growing popularity of home equity loans that allow you to enter your retirement with mortgage debt, many people purchase a home for which they’ll be paying during their retirement. Moreover, when you reach your retirement age, you may also want to consider selling your home.

Top 3 Retirement Plans That You Must Consider

If you’ve already determined all your future financial requirements and planned a strategy for your retirement, it’s time to choose one of the most reliable and top retirement plans for a better future. Here’s a list of the 3 most prominent retirement plans that you must consider:

1. Unit Linked Insurance Plans

While the traditional pension policies invest your premium in safe investment alternatives such as government securities and debt, several aggressive investors prefer personal plans that include investing premiums in high-risk and high-return options like money market and stocks. 

Popularly, these types of policies are known as Unit Linked Investment Plans. The general principle of these plans is to invest the funds in instruments like equity to show the invested component. It also offers cover in case of premature death. 

2. Pensions Plans

Earlier known as defined benefit plans, pensions are the simplest and easy to manage retirement plans that require you to do almost nothing as an employee. These are funded entirely by your employer and offer a fixed benefit to you after your retirement.

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However, they’re slowly losing pace in the market because not many companies are offering it. According to a recent report, only 14% of companies listed in the fortune 500 offer pension plans to their new workers. Earlier, the exact figure used to be 59 per cent.

3. Guaranteed Income Annuities

Although the Guaranteed Income Annuities are not offered or funded by employers, individuals can still purchase this plan and make a pension of their own. It allows you to gain a lump-sum amount at your retirement, and you can also purchase an immediate annuity to get monthly payments afterwards.

Even with so many good features, many people don’t agree to be comfortable because other popular deferred income annuities pay you overtime. That’s because if you’re not sure when you need to retire, the plan doesn’t make any sense at all.

The Takeaway

Planning your financial security ahead of time certainly makes you live your retirement life with fun and happiness. With the top retirement plans stated above, you can easily make sure that you plan for your after-work life properly and ensure a financially secure future.