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Every individual hopes for a relaxed, independent, and secured retired life. Timely and adequate investments in a retirement plan not only assure a steady tax-free income but also spell peace of mind and a cushion against the rising cost of living.

What is a Retirement Plan?

A Retirement Plan is an investment plan wherein an individual saves money from his or her regular income and builds up a fund that can be used post-retirement. These plans are offered by Financial Planners who help invest your money so that you can beat inflation and earn a Real Income.

Why should one invest in a Retirement Plan?

A retirement plan is a vital investment, considering the rising cost of living (inflation). A carefully planned and periodically reviewed investment plan can prepare you to manage your expenses and maintain your lifestyle as you get older.

Types of Retirement Plans

Retirement plans vary in terms of their structure and benefits. The two major types of retirement plans are

  • Defined benefit plan
  • Defined contribution plan

How does it work?

In case of a Defined Benefit Plan, the investor is entitled to receive a specific amount of retirement benefit based on factors like years of service left and present earnings.

In a Defined Contribution Plan or Money Purchase Plan, the investor contributes a specified amount each month. This is deposited in an investment account and the principal amount along with interest can be availed as retirement.

Tips to Invest in a Retirement Plan

  • Start Early - The longer your money stays invested, the more you can benefit.
  • Start Small - The premium that one can afford depends on the current income and the corresponding savings that one can commit.
  • The retirement amount required depends on the future financial plans/ commitments one expects to fulfill. Expenses for travel, health etc. influence the total retirement corpus one needs to build.
  • These savings are your primary source of income post-retirement. Hence this corpus should not be withdrawn unless necessary.
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