Retirement- When you return from work one day saying, “Hi, Honey, I’m home – forever.” – Gene Perret
Retirement is indeed a golden phase in one’s life. You have ample time to do things that you had always wanted to do and cherish the goals that you had set for your post-retirement life. Be it spending time with your grandkids, buying a small beach house, or travelling to Europe!
(Image Source: Shutterstock)
However, to make these dreams a reality, you need to plan for your retirement as early as possible. This is because, retirement also marks the end of active employment, meaning that you will no longer be receiving your monthly salary.
When you consider retirement planning, there are a plethora of investment options which will demand your attention, and you may get lost in the brawl of these products. However, ULIPs can perfectly fit the puzzle when it comes to planning for your golden days.
What are Unit Linked Insurance Plans?
A Unit Linked Insurance Plan is a combination of insurance and investment. Meaning, a part of the premium that you pay is used for providing life cover, and the rest is invested in funds of your choice. Thus, these plans pay a maturity benefit and also a death benefit as life cover is provided with the same.
Low-Cost ULIP Charges:
For the first five years, the annual charges on a ULIP plan are reasonable, thanks to IRDAI who has set the maximum cap on these charges. As per IRDAI’s orders, insurers cannot charge fund management fees more than 1.35 percent per annum. And the good news is, many insurers like Max Life Insurance levy ‘Zero’ policy administration charge and ‘Zero’ premium allocation charge.
Thus, unit-linked plans have become the hottest-selling life insurance plans today. And it is no surprise that investors are favouring unit-linked plans for their retirement over pension plans.
Here’s why you should plan your retirement with unit-linked insurance plans:
Wide Range of Investment Options
Every investor has a different risk appetite when it comes to investing. Unit linked insurance plans take this into consideration and provide multiple investment options. Typically, there are three categories of funds available for investors:
- Equity funds (which focuses on investing in equity)
- Debt funds (which invests in government securities, bonds etc.)
- Balance funds (which is a mixture of above two)
Further, there are myriad of funds available under these basic options, with many variations (based on the company, sector, debt and equity proportion). Thus, allowing you to choose the best-suited option for yourself.
If you have a higher risk appetite for equities and a considerable time frame till you retire, you can go for equity funds in your unit-linked plan. Returns in equity-linked ULIPs are expected to be much higher because your money is invested in equity markets. This allows you to build a considerable corpus for your golden days and gives you the much-needed financial cushion.
Let’s say that you are 25-year-old when you purchase a ULIP plan. You choose an equity fund in your plan and make a monthly investment of Rs 3,000 for 35 years.
Assuming that your money grows at 10 percent, the returns on your plan at the age of 60 would be nearly Rs. 1.03 Crores.
Flexibility to Switch
As mentioned before, unit-linked plans also give you the option of choosing the funds of your choice. Thus, if you are a conservative investor who is not comfortable with the idea of investing in equity markets, you can opt for debt funds.
And if in future, when the equity markets are booming, (which can help you get higher returns than your debt funds) you can make a switch to equity funds. Moreover, insurers today give you the flexibility to switch your money as many times you want (varies from insurer to insurer). All you need to do is to make the right switch at the right time.
Suppose you are 25-years-old and have decided to buy a ULIP plan by paying an annual premium of Rs 30,000. Your income grows a few years down the line, and you want to invest the surplus amount somewhere.
In that case, you can invest the surplus amount towards your retirement with the help of the ‘Top-up’ facility available in unit linked insurance plans. Yes, ULIPs give you the opportunity to increase your investment in your existing plan through this facility, and therefore, assuring you a higher return by the time you retire.
Today many insurance companies have come up with attractive unit-linked insurance plans. You need to be cautious about which plan you want to opt for. Also, to get the best results from these investments, you must consider investing for a long-term.
Finally, all you need to do is research, compare and select the best suitable plan.
Retire Rich and Retire Happy!