How to plan for post-retirement expenses?

Know how to build your retirement corpus by planning your investment with an insurance policy.
How to plan for post-retirement expenses?
3 mins

Retirement planning is a multitude of processes that involves a range of factors like family goals, life goals, and financial goals. However, to achieve any of these goals, one of the primary parameters is having a healthy financial cushion to lead a comfortable and secure life in the older days. And, this starts by investing wisely. So, why not invest in a plan that works as both insurance and investment plan.

It is a common assumption that insurance plans offer only financial coverage in case of an emergency. However, there are life insurance plans which offer both financial security and returns. These insurance plans work as a source of income equivalent to your present work income at your older age. These plans come with low-risk, tax-saving, and goal-based savings benefits.

Read on to know how life insurance policies help you plan your retirement.

How insurance policies work for retirement planning?

The policyholder needs to pay a certain amount as premium against the insurance policy bought. The premium is decided upon the individual’s financial requirements and has to be paid on regular intervals. This premium is then divided into two portions – one goes as a savings for later, that returns as monthly income and while the other portion is for the insurance.

There are also Unit-linked Insurance Plans (ULIPs), which work in a similar format. But, here the one portion of the premium goes towards insurance and the other towards investment in equity or debt funds. This helps you grow your wealth for future. These plans also offers the flexibility to switch between funds, as per the policyholders risk appetite and market value.

Types of insurance plans for retirement

Here are some of the popular insurance plans for retirement.

1. Retirement plans

These are part of life/annuity plans, designed to cover the post-retirement needs like medical and living expenses of individuals. You can grow your savings with these long-term plans and create a fund that can be withdrawn in parts or whole. Basically, it benefits as monthly pensions during your retirement. Some retirement plans also provide loyalty additions and bonuses, boosting your retirement corpus.

2. Savings plan

This is another type of life insurance plan that works as savings while giving you steady returns. These plans give assured maturity benefits and offer guaranteed additions and bonuses.

3. Term plan with return of premium option

Upon surviving the term plan, the insurer pays you back the premium paid against the plan. In case of the policyholder’s demise within the policy tenure, the sum assured under the plan is given to the nominee.

Why plan for retirement?

Your regular source of income either stops or reduces during your retirement age. Nonetheless, with time, the medical expenses increases left alone inflation is on rise. A thorough retirement planning gives individuals a full grasp of their life goals and shapes the road to achieving them.

Thus, it becomes far more important to ensure you have enough capital to spend the rest of your life comfortably. Here’s why retirement planning is important.

1. To cover day-to-day expenses

Everyone must sustain the essential living costs, even post-retirement. Not everyone is entitled to gratuities or pensions, and those that do, usually do not receive enough to meet all needs.

2. To cover health care expenses

You tend to develop health issues in the older age. With increase in medical inflation, cost of quality healthcare has become expensive. Therefore, individuals need a substantial retirement corpus to pay for various medical expenses to prevent such a financial crisis.

3. To accomplish retirement goals

These goals may include travelling to new destinations, pursuing life-long passions, etc. However, these will not be realised without retirement financial planning and saving.

4. To combat inflation

The price of products and services keeps rising steadily with time. As a result, in the future, consumers will pay more for all goods and commodities, from groceries to travel and lodging.

5. To deal with instability

The death of kith and kin, natural disasters, financial hurdles in the family, etc., may all cause emotional and financial anguish in one’s life. Therefore, a sizable retirement corpus is always handy to deal with such unforeseen catastrophes.

To sum it up, retirement planning is one of the important aspects in life and one must start early to reap the maximum benefits in future. Insurance policies combined with investment plans come at a low risk and gives you the required financial security during your retirement years. With these plans, you have a life cover through out the policy tenure, along with tax benefits.


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