5 important points to consider before choosing a retirement plan

There are several retirement plans, also called retirement plans, in which individuals can invest. The main objective behind these plans is to ensure a steady flow of income after retirement.

Rapidly changing social realities and the rising cost of living have made retirement planning a must for everyone. Whereas in the past, when mixed families existed, the older generations were taken care of by the younger members of the family. However, small and nuclear families are becoming the norm now as the younger generation continues to move to cities in search of better earning opportunities. So it has now become important for every individual to have an independent retirement income.

Experts say that with proper planning and investments during the active income years, one can accumulate enough for a peaceful retirement life without financial problems. However, few people seem to have taken retirement planning seriously.

A recent study found that one in four people haven’t even thought about retirement, while 50% of respondents thought their savings would run out in 10 years. Also, for most respondents, saving or investing for retirement was not a top financial goal.

“In view of ever-increasing inflation, investing in these schemes has become paramount and so even if there are considerable savings in a bank account, a pension scheme will still be a prerequisite for maintaining retirement” , Sundara Rajan TK, partner at DVS Advisors LLP, told FE Online.

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There are several retirement plans, also called retirement plans, in which individuals can invest. The main objective behind these plans is to ensure a steady flow of income after retirement.

An investor can choose any retirement plan. However, experts suggest that before choosing a retirement plan, individuals should keep several factors in mind such as positive return after inflation, tax implications and more. Here are five key points an individual should consider before choosing a retirement plan.

1. Positive post-inflation returns

When investing or saving for your retirement, it is important to take inflation into account. Such investments should guarantee a positive post-inflation return.

“Long-term investing should guarantee a positive return after inflation. For example, if the inflation rate is 6% per year, the value of Rs. 100 today will be equal to Rs. 94 after one year. So, if investing in the pension fund yields a return of 6% or less, it will not be a viable option for planning for retirement, Rajan said.

2. Do not look for more risks

Retirement planning experts say investors shouldn’t be looking for more risk in retirement. It is important to stick to a guaranteed return on investment and furthermore, investments should reflect the low-risk corpus to combat increasing market volatility.

3. Ensure an adequate pension

Rajan said that choosing a retirement plan should ensure that you receive adequate retirement income after retirement, which should be enough to cover expenses as well as a backup for emergency needs.

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4. Consider the amount of annuity offered

Pension plans differ in terms of the annuity offered. While some plans may provide the annuity for only a certain period after retirement, others may provide a steady salary for life.

“Another relevant consideration is the amount of annuity offered. There are different retirement plans that differ in terms of the annuity offered. Some plans may provide payment of an annuity only for a certain period after retirement and some may provide regular payment until the death of the person. There are plans that provide the annuity to applicants even after the death of the insured person,” Rajan said.

5. Tax consequences

Taxes are probably the most important factor to consider when choosing a retirement plan. The tax aspect will be different depending on the type of pension plans and the risk appetite of the investor.

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