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The role of long-term plans in securing your retirement

Prioritising immediate needs over long-term goals in the new motto for millennials and generation X.The ease of availability of lifestyle goods has put a halt on future financial planning for most young professionals, while thinking of retirement planning before 35 is considered a taboo. A recent survey found that over 27 percent people contribute nothing towards their long-term savings due to their current liabilities such child’s education, debts or even affording their own lifestyle.

Most of them tend to think that as long as they are earning well, their income will take them through their golden years.However, this is not the case. While regular savings are good, the saved amount falls short of the requirements once we factor inflation into the equation. Thus, it is important to invest your money in instruments that can give you good returns after a period of time.

Investment instruments can be broadly classified into two categories– wealth creation instruments like ULIPs and saving instruments like pension plans.

ULIPs

ULIPs are market-based wealth-creating instruments that also provide life cover to the policyholder. They are transparent and being the policyholder, you can check where your money is being invested. Moreover, in ULIPs, you have the choice to allocate and switch your funds according to your preferences. For instance, if the market is good, you can opt for equity investments where the chances of returns are high. Otherwise, you can opt for debt funds where your money will be safe from any fluctuations in the market.

If you invest in ULIPs, you get tax rebates on the premiums paid under Section 80C and maturity and death benefits under Section 10(10D). You should also note the fact that investments made in equity funds are subject to market risks.

Pension Plans

Pension plans are wealth accumulating instruments that help you in saving money for your golden years. Most people think that their PF account will be enough to cover their expenses post-retirement. However, it is not always the case. One must still have a back-up plan in case their PF account falls short of the money.

Pension plans can be a source of steady income after your retirement. You can choose a regular or single premium pension plan according to your requirements, pay the premiums and receive a steady income after your retirement. The investments made towards pension plans are also eligible for tax deductions under Section 80CCC. As pension plans are savings instruments, there is no risk involved for the investors.

Benefits of Investing Your Money in Long-Term Plans
  • Helps in Goal-Based Planning: Investing money is a suitable method of saving money for achieving life goals. These goals can be purchasing a house, your child’s education, marriage expenses or your retirement fund. All these goals have one single thing in common, they require a good amount of money.
  • Secures Your Retirement Money: While keeping money in a savings account might feel a safe option for you, it does not offer good returns. If you want higher returns, investing in a market-linked instrument is the way forward. Moreover, with an option like ULIP plan, the risks of losing your money in the market reduces by a good margin.
  • Protects Your Loved Ones: Investing your money in long-term plans gives you an option of creating wealth and securing your family. So, if any unforeseen mishap happens, your family will get the guaranteed money in addition to the maturity value in the manner suitable for them.
  • Tax Benefits:The money that you invest in these instruments can also provide you tax exemptions. Any premiums paid towards these wealth-creation instruments are eligible for tax rebate under the Income Tax Act, 1961. Moreover, the maturity fund that you will receive from these instruments is also exempted of taxes.
Invest for Long Term = Retire Rich

It is always better to strategise for your future needs in advance. And when it comes to retirement planning, you should always choose your options very carefully. Your investments should be made keeping your risk appetite in mind for when it comes to retirement, it is better to be safe than sorry.

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