After working so hard for so many years of your life, you finally retire. Now, retirement is a great time in your life. You typically do not have too many liabilities to worry about and are free from work pressure. So, if you truly want to enjoy this phase of your life, then you need a proper pension plan to give you much-needed financial independence. With that being said, here are more details about retirement plans.
What is a pension plan?
Retirement or pension plans come with both the components of insurance and investment. The basic tenet is that you invest regularly in the pension fund to accumulate a particular sum of money that you will get back in a periodic manner when you retire. If you open a retirement plan and start saving your money early, then you will earn enough by the time you retire to get your financial independence, even during the golden years of your life.
Advantages of saving in a retirement plan
Before you go ahead and open a retirement plan in your name, it is important to understand the benefits that you will be getting. So, here are all the reasons why a retirement plan is always a good idea:
Guaranteed income
As mentioned before, you get to have a steady source of income even after retirement. So, you do not need to depend on your children for every penny. Just make sure that you save up enough for a smooth sail.
Tax benefits
As per the Income Tax Act, 1961, you can get tax exemptions of up to INR 1.5 lakh on your pension plan under Section 80C. There are other clauses under Section 80CCC and 80CCD that also offer additional tax deductions in some cases based on the type of retirement plan you have chosen.
Choosing the vesting age
Vesting age refers to the age at which you want to start receiving the money you saved as a pension. In most cases, you are allowed to choose the vesting age as per your convenience. It is not mandatory to select 60 years as the vesting age. Maybe you still plan to work part-time when you are 60. Thus, you will not need the money right away. So, you can set the vesting age at 70 or 80 if that seems suitable to you.
Withdrawal facility
Most retirement plans allow you to withdraw before the plan matures, though there is a limit on how much you can withdraw. So, if you meet with some financial emergency during the phase when you are saving money, then you can be assured that you have the money saved up in your pension plan to help you out. However, make sure you consider a withdrawal only in case of a serious financial emergency. After all, you are saving money for your future needs.
When it comes to retirement plans, the earlier you start, the more wealth you accumulate. So, if you are yet to consider a retirement plan, then now is the time to do it.