Retirement might be a much-awaited time of life for those who have devoted their life working. Let’s admit most of us have planned our retirement – starting from where we will live and ending with what we will do. In a nutshell, the picture is bright and shiny in our heads.
However, when it comes to retirement planning, it is not limited to planning what you would be doing. It also involves thinking about the financial aspects. As retirement puts an end to your earning years, you can be a victim of financial crunches if you do not give enough consideration to the financial aspects of retirement. After all, you need funds to live the life you dreamed of in the first place, let alone manage the basic lifestyle expenses.
This is where pension schemes in India come in. We will be discussing them at length in this article.
What are Pension Schemes in India?
They are designed to ease the financial burden on the retiree by offering them a replaced source of income. Pension schemes in India are known for their annuity feature, which offers a regular income to retirees to manage their expenses. However, some pension schemes in India also provide a lump-sum benefit to cope with medical emergencies. The best pension schemes in India are provided by both the government and Non-Banking Finance Companies.
How do Pension Schemes in India Work?
Pension schemes in India are formulated comprising two stages – accumulation and distribution phase. The accumulation phase involves the payment of premiums. This premium is invested in the fund for a pre-decided tenure. The distribution phase starts once the accumulation phase ends. The distribution phase comprises the allocation of the fund to the individual once they retire. The individual is provided two alternatives – you can commence receiving the monetary benefit or buy an annuity plan that offers regular income to the retired individual.
Why are Pension Schemes Important for Retirement?
Pension schemes in India are an essential part of retirement planning. Here are all the reasons why:
- They Secure your Retired Life:
The main objective of pension schemes in India is to provide financial security to individuals after they retire. Most pension schemes in India offer annuities, wherein a fixed sum is allocated to the individual to manage basic lifestyle expenses. The amount helps create a financial net around you to ensure that you manage the basic expenses efficiently.
- They Help you Manage Health Emergencies:
The healthcare needs of a retired individual do not match with that of a young individual. This means you are more susceptible to health issues as you age. The lump-sum pay-out offered by some pension schemes in India can help an induvial manage the financial repercussions of health issues and health emergencies.
- They Help you Attain Financial Independence:
Nothing sets you free as financial independence. It is a liberating feeling to not depend on anyone for your financial needs. Financial independence is what we enjoyed as we worked to earn a living for ourselves and our families. However, with retirement and an end of income, financial independence can take a hit.
But this is where pension schemes in India come to save the day. By offering you a replacement income or lump-sum pay-out, they ensure that you still have financial independence even after you retire, so you do not have to depend on anybody, not even your children, for your financial requirements.
- You are Stress-free in the Present:
Life is too short to spend it stressed. But work-life came with its own stress, from adhering to tight deadlines to managing daily chores and responsibilities. But as everyone says, retirement is the time to unwind and live life stress-free. Ergo, you should not worry about what your financial future will hold after you retire. Having some of the best pension schemes in India by your side, you can focus on the present and live life stress-free, being assured that the financial aspects of your retirement life are well taken care of.
Couple the Best Pension Schemes in India with a Strong Investment Portfolio to Eliminate Financial Burdens
Realistically, pension schemes in India can ease the financial burden but not eliminate it. If you are someone who lives a comfortable or lavish lifestyle, you cannot entirely depend on pension schemes in India as they might turn out to be inadequate to meet such financial requirements. It is essential that you have a top-notch savings cum investment portfolio as a supplementary source of income. You can consider investing in a Unit Linked Insurance Plan, mutual funds SIP, PPF, SIP, and stocks to create a strong investment portfolio that aligns with your financial objectives and your risk appetite.