One of the most important concerns for a lot of people is building a retirement corpus. With the help of these funds, they can live a hassle-free life after retirement. Therefore, it is recommended that every person should consider purchasing a retirement plan in order to secure their post-retirement life. But before buying a plan, there are a few things that every individual should consider.
Here are the things that people should keep in mind while buying a retirement plan to build lifetime income-
Understand Immediate and Deferred Annuity Plans
Generally, retirement plans are offered in two types- immediate annuity and deferred annuity plans. In case of immediate annuity plans, a person needs to pay a single premium in order to buy a policy. Such plans can pay pension immediately after the policy starts. However, there are plans that allow the person to choose the frequency of payout. Deferred annuity plans allow people to choose when the pension payment will start.
Understand Different Types of Plans
There are different types of retirement plans, such as endowment plans, unit-linked plans, etc. Before purchasing a policy, people should understand the different types of plans. This is because it will help them understand which policy is right for them. For instance, endowment plans are risk-free. Therefore, people who don’t want to take any risk should consider such plans. However, if a person has a high-risk appetite, then he/she can consider purchasing ULIPs as they are market-linked and can offer higher returns.
As the regular source of income stops after retirement, every person should consider their current monthly expenses and future expenses while purchasing a retirement plan. People should buy a policy that can allow them to build a significant financial corpus to live a stress-free retirement life.
Rate of Interest
The rate of interest offered by the plans can vary a lot. People should calculate the returns they can earn based on the rate of interest before purchasing a policy. This can help them select the right insurance policy.
An important factor that every person should consider is medical expenses. Medical expenses can cause a huge financial burden. Therefore, it is critical to keep in mind such costs while determining the retirement corpus.
Consider the Debts
If a person has outstanding debts, then it is wise to pay them off before retirement. However, in case a person can’t pay off the debts before retirement, then he/she should calculate such loans while determining the funds required for post-retirement life.
In conclusion, planning for retirement is very crucial, and people should consider purchasing a retirement plan as it can provide financial security. Keep the aforementioned points in mind while purchasing a retirement plan.