When we are young we feel invincible and confident. Then middle age hits, bringing with it a lot of medical issues and unexpected twists and turns in life. By the time it will be too late to start saving for retirement. So plan early, pay small premiums as you are considered less liable by the insurance agencies. If your money is with them for a longer period, they will be generous in your settlement.
What are the features and benefits of a pension plan?
Pension plans offer the same income and advantages to an individual even after ceasing to work. Many youngsters today are looking forward to retiring early and enjoying life away from the shackles of a desk job. If you have been caught napping in this area, don’t panic. Just pay a higher premium and try to catch up by curtailing your current expenses. If you are late you may even consider reverse mortgaging your current property to benefit you till you die. Find out the details of the plan from your advisor before taking a decision.
How does the insurance company offer you a lump sum after your payment term?
They invest your monies in mutual funds, government bonds, gilds etc. Insurance companies are subjected to strict regulations in all the countries around the world. This guarantees good returns for your money. However, if you are investing in the markets yourself, there are certain risks involved.
Taxes on pension plans are determined by the government to be lesser than other benefits, so there is savings in this area also.
There are pension plans with cover and without cover. What it means is that, if the insurer dies during the payment tenure, there is extra payment to the nominees for the life insured. In case there is no cover, the accumulated payments with interest are paid to the survivors of the insured.
There are many plans in which annuity payments are made even after the return of purchase price. In case you are survived by your spouse they will get the benefit. So there is nothing to lose.
There are other plans like immediate annuity, which is applicable if a lump sum is paid. The payouts start from the next year itself. There is another plan called differed annuity plan in which regular installments can be paid and payouts start at periods ranging from 5 years onwards.
The difference between a conventional life insurance and a pension plan is that you live to enjoy benefits in your own lifetime. While life insurance provides for your family in case of demise, here you pay yourself to live longer and enjoy the same lifestyle. So whatever stage of life you are in right now, if you are working you owe it to yourself to buy a good insurance plan. Think of it as the first expense and give standing instructions to the bank to clear those payments as soon as your salary check is credited.
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