Ways to retire comfortably

In developed economies like the US, UK and Canada, the State guarantees social security for all citizens post retirement. Compare that to India, where the pension sector is grossly under-developed, with formal pension covering only about 12 per cent of the working population.

What’s worse, there is a good chance that the PF payouts, which seem like an attractive amount now may be rendered insignificant due to inflation.

Therefore, to beat the inflationary pressures and to ensure that you have a comfortable lifestyle post retirement, you must work out a comprehensive financial plan for retirement.

While there are a variety of investment products that you can look at to build a retirement corpus, here’s how insurance plans can be used.

Retirement or pension plans

You can invest in retirement or pension plans offered by insurance and mutual fund companies. These plans are long term in nature and you can opt for a relevant plan based on your target corpus and the time horizon.

Pension plans offered by insurance companies give you an option of claiming up to 30 per cent of your sum assured as a lump sum upon maturity, while the rest is paid off as annuity.

You can use this lump sum received to kick-start your retired life in case the provident fund payments are not paid on time. The consequent annuity payouts can be used to take care of your basic household and medical expenses on an ongoing basis.

This apart, with the rising cost of health care, comprehensive health insurance is another must.

Invest in a mediclaim as well as a health insurance policy to make sure that adequate funds are available for your health care needs when you require them.

Endowment plans

Investing in endowment plans by insurance companies can help you save for specific goals like your child’s marriage, buying house. These are insurance-cum-investment plans where you need to pay regular premium for a specified tenure, at the end of which you get a guaranteed accumulated corpus as maturity value.

The advantage of investing in these plans is that even in case of an unfortunate death of the policyholder, the sum assured is paid out to the nominee making sure that the investment or the financial goal does not have to suffer.

In addition to these, you can also look at investing in a combination of Public Provident Funds and fixed deposits. You can also invest in equities either directly or through ULIPs and mutual funds depending on your expertise and risk appetite. Also remember to make provisions for all major liabilities that are likely to crop up post retirement, such as your children’s education.

As you grow older, it’s advisable to cut down on your equity exposure to shield your saving against market volatility. It is for this reason that in most ULIPs, the equity exposure is adjusted to suit your risk profile and your financial goals.

These investment avenues along with your PF and pensions will ensure that you spend your retirement years living the life you always aspired for, without having to worry about the finances.

(The writer is CEO and MD, Aviva India)

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