Don’t Plan Retirement But Plan A Happy Retirement – Things That You Must Do

Wed, 09 Feb 2022 10:37:18 +0000

The Buyt Desk

Earlier you start better it is- this is very true when it comes to retirement planning. You must start planning for your retirement as early as you can. Retirement is a long-term goal and thus requires to be planned in a disciplined manner if you want to enjoy a hassle-free retired life. Nowadays lots of people want to retire early and if you are one of those then you need to be more meticulous with your investment and savings. The crucial part of retired life will be the pension that you receive. Your lifestyle post-retirement depends mainly on the amount you receive monthly after retirement. Plan well so that you have a good retired life. Here are a few things that you must do to have a happy, secure and satisfying retired life.

Make your retirement budget and retirement income plan

If you start planning your retirement from the day you start earning, your retired life will be smooth and secure. And if you are planning for early retirement then even more planning and investment need to be done. The more years you lose and go unplanned, the more load and stress you have to bear in the coming years to build a sizable corpus for your retired life. Calculate your essential expenses including rent, food, logistics, clothing, health insurance, life insurance and other conveniences. Based on this decide on the lump sum amount that you need per year for stress-free retired life. But do not forget inflation, consider this factor while calculating. Also, consider the family responsibilities that you will be having post-retirement like kid’s education or marriage or parent’s medical expenses.

Increase your investment

The earlier you want to retire, the more you have to save for retirement corpus. The normal retirement age in India is 60. The thumb rule says that if you want to retire at the age of 60, you have to put 15% of your annual income into your retirement savings after you start earning. Similarly, 20-25% if you want to retire by age of 55 and around 38% if you retire by 50 years of age. Basically, your investment for retirement increases as you prepone your retirement.

Create adequate insurance cover

Even after all the planning, you do for your retirement, you still cannot foresee what you will encounter in your future. Maybe you have accumulated a good amount, enough for a comfortable retirement life but what if you go through some serious illness that will cost you all your savings or if you are no more? You can secure your retirement planning with good life insurance and health insurance. Also, plan your savings considering the premiums to be paid for your insurance post early retirement. Consider buying term insurance cover, critical illness health insurance, medical insurance for self and family and accidental disability cover.

Clear all your debt before retirement

You might have taken some loans for your business, kid’s education, marriage, illness or vehicle loans, clear all these loans before you go for retirement. If you plan to pay up your loans post-retirement then it will definitely cause a hole in your retirement corpus. So make sure all the payments are done and you are debt-free at the time of retirement.

Complete your big-budget family responsibilities

If you have a family, then make sure all your major family duties like child education and marriage, buying a house, buying a car etc are achieved before your retirement period. But if you have some duties which need heavy spending, then do heavy investments so that you have enough funds to fulfil the commitments post-retirement. Never burden your funds that are meant for post-retirement.

Create different sources to earn

You just cannot rely on pension and retirement corpus for luxurious retired life. Yes, a basic simple life with little entertainment can be led with these funds but to enjoy your retired life you need to generate money from different sources. A passive income source is a key to earning even after retirement. To reduce the load on retirement corpus and to make it last longer, extra earning is a must. There are many ways to generate extra income and these two are easy ways

Invest in real estate very early in life so that you can have rental income for retired life.
Invest in RBI gold bonds so that it gives extra income post-retirement

These two investments even take care of inflation. Hence these investments are best to generate income post-retirement. Convert your hobby to a profession post early retirement. This will keep you busy and happy while generating a good amount too.

Summing up

Only meticulous planning and good investments made very early in professional life will ensure a good life post early retirement. Planning for early retirement should start in the late 20s or early 30s. The earlier you start investing for retirement, the smoother your post-retirement life. There are professionals out there who help you plan your retirement, seek their help if needed.

Invest early and enjoy early retirement.

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NPS Vs APY – Which is a Better Retirement Plan?

Mon, 06 Sep 2021 07:06:07 +0000

The Buy Desk

According to the annual report of the National Pension System Trust (NPS Trust), Atal Pension Yojana is the most popular social security scheme under the National Pension System. It is the most subscribed scheme in non-metro cities. So far more than 2.8 crore people have joined APY (Atal Pension Yojana). More than 66% of the 4.2 crore National Pension System (NPS) subscribers have opted for Atal Pension Yojana at the end of 2020-21. Both the National Pension System (NPS) and Atal Pension Yojana (APY) are two retirement specific investments offered by the Government. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Let’s have a look at how these two schemes work and what their features are.

National Pension Scheme

It is a contributory investment cum retirement scheme. The subscriber contributes monthly in the scheme to create a corpus for his/her retirement. The subscriber can withdraw the corpus from NPS only after he/she turns 60 years of age. Upon maturity, an individual is allowed to withdraw only 60% of the invested amount. With the rest of the 40% amount, he/she will have to purchase an annuity and this will be paid out as a monthly pension to the subscriber.

Atal Pension Yojana

Atal Pension Yojana (APY) is a government-sponsored social security scheme. It offers a guaranteed minimum pension of Rs 1000 and a maximum of up to Rs 5000 depending upon the contribution amount. You could contribute as low as Rs 80 or as high as Rs 1500. It will depend upon what kind of pension you want from this scheme after you turn 60. All bank account holders can join the scheme.

Tax Benefit

The contribution made to both NPS and APY is eligible for tax deduction up to Rs 1.5 lakh under Section 80C of the Income Tax Act. With NPS you can also get an additional tax deduction of up to Rs 50,000 under section 80 CCD(1B).

Key Differences between NPS & APY

Age limit

NPS – Entry age is 18 and the maximum age of entry in NPS is 70 years.
APY – Entry age 18 years and the maximum age being only 40 years.

Eligibility

Apart from Indian citizens even NRI’s are allowed to enrol in NPS.
Only resident Indian Citizens can subscribe to APY.

Return

NPS doesn’t give a guaranteed return or a pension. The subscriber invests in market-related NPS funds and as per their performance, you get a return. For receiving pension the subscriber mandatorily buys annuities.
APY offers a lifelong pension to the subscriber, lifelong pension to the spouse after the subscriber’s demise.

Withdrawals

You are allowed to prematurely withdraw money from the corpus for certain specific events before you turn 60 years of age. You can only withdraw a maximum of 20% of the corpus.
Atal Pension Yojana does not allow any partial or premature withdrawal prior to the end of the term. Only in the case of demise of the subscriber or critical illness is it possible to withdraw the accrued balance early.

Where do these schemes invest?

NPS invests in 4 types of funds which puts your money in equity, corporate debt, government bond or alternative investment funds. You can choose to invest as per your risk-taking ability.
APY allocates money only in government securities.

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