The question isn’t if you’ll retire—it’s whether you’re prepared for it
Like birth and death, your retirement is inevitable. And just like all major life events, one should prepare for this one too. After all, you’re retiring from work—not from life! This means that you still need to have an income of some kind, even though you no longer have a job. This is where retirement planning comes into the picture.
The goal of retirement planning
Retiring is like being reborn into a new life. To enter this new phase, you will have to accumulate enough money from your current earnings, so that you can have a happy post-retirement existence.
What should my retirement target be?
This again depends upon many factors, such as
1. What age you plan to retire
o This includes your contribution period
o It also refers to when you expect to start using the fund
2. What your expected life period after retirement is
o How long you expect to live will determine the size of your retirement fund
3. What your monthly expenses after retirement will be
o You will need to define the amount of annuity you will require on a monthly basis
Tips and tricks
Based on your anticipated monthly expenses just before retirement, plan to build a fund which is at least 20 times your anticipated yearly expenses in the last year before your retirement.
For example, say your estimated monthly expenses at the time of retirement amount to Rs50, 000. After adjusting for inflation, this is how you would calculate your retirement fund:
Rs 50000 X 12 Months X 20 Multiplier factor =1,20,00,000(1.2 crores)
How much should you save /contribute to achieve your retirement fund target?
Depending on your age, existing investments and new investments, you might need to save an amount ranging from 10% to 25% of your income towards securing a comfortable post-retirement future.
While deciding the monthly, yearly or lump-sum contribution towards your retirement fund keep in mind the future annual increase in income and future lump sum receipts like gratuity leave encashment etc.
Two important ‘what if?’ questions
There are a two additional questions you might consider answering:
· What if you wanted to retire sooner rather than later—how would you plan for it?
· What if you wanted the freedom to decide how you received your money, once you retired?
Modes of creating retirement fund
There are multiple ways in which to create a retirement fund, like investing in bonds,GPF,CPF,NPS,mutual funds etc.Any one mode or combination of modes can be adopted as per each individual’s needs.
HDFC Life has released a new investment product for retirement planning called HDFC life Click2Retire.
Two distinct features of HDFC life Click2Retire
Two key benefits of this plan include
· A flexible framework that can help you retire as early as 45 years, thanks to a low vesting or maturity age. You could also defer your vesting date to the age of 75.
· Different options with regards to withdrawing pension money post-retirement. If you wished, you could withdraw 1/3 of the gross proceeds which would be tax free.
The plan also allows you to pay your premium upfront or to pay it over a period of 8, 10, 15 years with a policy term of 10 to 35 years.
Other benefits are as follows:
- Zero entry charges (no Premium Allocation charge)
- It is an Online Pension Plan
- There are no policy administration charges
- Zero exit charges
- Assured Vesting Benefits that allow you to gain from any upticks in the market
- The option to start as early as 18 years
- Limited Pay & Single Pay options available in one product
- Death benefits for the nominee (which will reflect a higher fund policy value of at the time of your death or 105% of premiums paid)
Eligibility,Minimum & Maximum Premium amount,Premium frequency (as per chart)
Investment Funds: This plan is a Unit Linked Plan and comes with three options: Pension Equity Plus, Pension Income Plus, Pension Conservative Plus.
- Zero premium allocation charges(no change throughout policy period)
- Zero mortality charges (no change throughout the policy period)
- Fund management charges:1.35% per annum
- Investment guarantee charges:.0.10% on conservative Funds and 0.50% on others
- Total charges range between 1.45 to 1.85 %
You would receive the fund value or the assured vesting amount,whichever is higher
In the event of your death
The amount payable, upon your death, would be
- 105% of premium paid or fund value ,whichever is higher
- Nominee have a option to receive amount lump sum or purchase annuity
Generally all Unit Linked Plans have fairly similar features and with no real differences apart from the name of the account holder and the fund manager.However, HDFC Click2Retire has many unique features like fund charges at a very minimal rate of 1.45 % to 1.85 % per annum.
This plan is also better than a mutual fund as mutual funds generally charge 2.25% to 2.50 % of your assets under management. Given its many features and benefits,we can say that this retirement plan is one of the best on the market and we wholeheartedly recommend it.