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Retirement Plans FAQs

Retirement plans provide financial security after you stop working, ensuring a steady income and a comfortable lifestyle. These plans offer a combination of savings and investment options to secure your future. Find answers to important questions about retirement planning and how these plans can benefit you.

FAQs About Retirement and Pension

Here’s a list of FAQs about retirement and pension plans

1 What are the different types of retirement plans?

The different types of retirement plans are annuity plans, pension funds, National Pension Scheme, and pension plans that provide life coverage. Some of these plans provide fixed payouts, while others grow considering investments made. To choose the right plan, consider your goals of retirement, risk tolerance, and financial assistance you need.

2 What happens if I surrender my pension plan before maturity?

If you surrender your pension plan before maturity, you will receive an amount lower than the total premium amount you have paid. This happens because all benefits are included in your policy only if you choose to invest till the end. There are, however, certain plans that allow for early withdrawal after a lock-in period, but for major benefits, you must stay invested for a long time.

3 Which is better- pension or investment?

A pension plan offers a guaranteed income after retirement and thereby ensures financial security. In contrast, investments like stocks and mutual funds offer higher returns but carry higher risk. Thus, if you prefer to attain financial stability in the long run, go for a pension plan. But if you are capable of managing risks, investments let your wealth grow faster.

4 What is the difference between pension and retirement?

A retirement plan is always preferred over a pension plan as it provides more flexibility and enables investors to choose the desired amount they wish to put into their pension fund. You cannot change your pension plans once you start to invest. Moreover, a retirement plan considers investment and savings to maintain a desired standard of living once you retire.

5 What is the 7% rule for retirement?

The 7% rule for retirement is an essential guideline, particularly for retirees, implying that retired individuals should withdraw only 7% of their retirement savings each year to meet their living expenses. This often aligns with the "4% rule", which states that you should have a withdrawal rate of only 4%.

6 Can I take my pension at 55 years and continue working?

Yes, you can withdraw money from your pension account when you are 55 years old and choose to continue working if your plan allows this. The rules of pension vary with different plans and countries. However, for some pension plans, you will be exempted from certain benefits if you earn beyond a limit. Thus, make sure to check out the terms and conditions of your plan before reaching a decision.

7 Can I withdraw money from a retirement plan before retiring?

Some retirement plans allow for early withdrawals but charge taxes and penalties. Plans such as NPS and EPF allow for withdrawals under medical emergencies. It is always recommended to avoid withdrawals at an early period to maintain stability after retirement.

8 How to prevent deduction of TDS on a pension?

If your total income is below the basic exemption limit and you want to prevent deduction of the Tax Deducted at Source (TDS) on pension, make sure to submit Form 15H (applicable for individuals aged 60 years or above) and Form 15G (applicable for others) to your respective bank account. Furthermore, you can also plan for tax-saving investments under Section 80C^#to lower the liability of taxes.

9 How to choose a pension plan?

To choose the right pension plan, start investing early and get better returns in the future through compounding. Alongside this, make sure to continue investing in a diversified range of assets. Some examples of these assets are bonds, stocks, real estate, gold and others.

10 What are the eligibility criteria required to buy a pension plan?

For the majority of pension plans, the eligibility criteria for purchasing is 18 years, while some plans allow you to purchase after 30 years of age. However, the maximum eligibility age for buying a pension plan is around 75 years. Eligibility criteria depend on the insurer and the kind of pension plan selected.

11 What are the types of government retirement pension plans?

The different types of government retirement pension plans prevalent in India are National Pension System (NPS), Senior Citizens Savings Scheme (SCSS), and Employees Provident Fund (EPF). All these plans provide financial assistance to policyholder's family members post-retirement with several tax benefits. For salaried employed individuals, EPF is mandatory, while SCSS is ideal for senior citizens.

12 What do you mean by a pension plan?

A pension plan is a plan designed to provide a regular source of income after retirement. This helps you to lead a stress-free life during your working period and get a fixed payout once you retire. There are several types of pension plans offering you guaranteed returns, considering your choice.

13 What is retirement planning in detail?

Retirement planning involves making preparations at present to lead a comfortable life in the future and continue meeting all desired financial goals and objectives independently. The steps include setting goals after retirement, estimating an amount you might need and investing to grow your retirement savings and maintain a decent standard of living post-retirement.

14 Is it possible for a person to have multiple retirement planning options?

Yes, a person can have multiple retirement planning options. Through a combination of various methods of saving and investment methods, such as PPF, NPS, and EPF, you can continue diversifying your retirement portfolio. This lowers your chances of risk and provides a stable source of income post-retirement.

15 How can I retire early?

To retire at an early age, start investing early in assets that yield high returns, such as equities and mutual funds. Apart from this, focus on creating a portfolio and finding ways of generating income. Creating a reliable source of passive income will assist you with early retirement. Furthermore, keep a close eye on your investment portfolio and make necessary adjustments to align with your financial goals.

16 What is the best rule for retirement?

The 4% rule is one of the best rules for retirement. According to this rule, you should hold at least 4% of your money towards investment during the initial first year of retirement. Further, increase or decrease the amount as per the inflation rate each year. This rule considers the effects of life expectancy, inflation, and investment return to attain a sustainable retirement.

17 How should I save for retirement?

To start saving for retirement, start saving at an early age to grow your money through the power of compounding. Prepare a budget to find out where you can cut back on expenses. Also, avoid withdrawing funds at a premature stage to ensure growth in the long term.

18 What is the average retirement income?

The average retirement income is difficult to calculate as it varies according to country, saving habits, and lifestyle. In India, the majority of people prefer saving a significant amount of their pre-retirement income to maintain a standard of living. This amount again depends on the retirement goals and savings accumulated.

19 What is the New Pension Scheme? What are its benefits?

The New Pension Scheme (NPS) is a government-backed scheme that is open for all employees employed in private, public, and even the unorganised sectors and only excludes those from the armed forces. It provides tax benefits as well as low-cost investment options.

20 How can I plan financially for retirement?

To plan financially for retirement, consider future expenses and suitable investment plans, and also make sure to contribute regularly. Start your investment planning at an early age to diversify your investments and review your required retirement strategy.

21 Are retirement plans in India regulated?

Yes, the retirement plans in India are well regulated under the Insurance Regulatory and Development Authority of India (IRDAI) as well as the Pension Fund Regulatory and Development Authority (PFRDA). Both of these authorities make sure that these retirement schemes are well maintained, secured and compliant with regulations.

22 How do I get a Rs. 50,000 monthly pension?

To get a Rs. 50,000 amount of monthly pension, follow the below-mentioned points:

Begin to invest early
Aim for diversification of your investment portfolio
Make the maximum allowed contribution to your retirement account
Explore the different types of annuities
Calculate your future expenses after inflation

23 I already have a PPF. Do I need to invest in a pension plan?

Having a PPF account is a good thing, but it may not be enough to secure your life post-retirement. PPF is helpful for the long term, but to gain a well-secured retirement life, one should proceed to invest in a pension plan to yield a regular source of income post-retirement.

24 Can I stop my retirement plan any time I want?

Yes, you can keep a pause on your retirement plan anytime you want, but that will have a significant impact on the amount you receive post-retirement. Some retirement plans allow you to earn returns even after you stop the plan, while there are plans that require you to surrender the policy.

25 What is an income plan?

An income plan is an investment plan that offers regular income after retirement. The main aim of this plan is usually to attain a steady source of income for attaining expenses post-retirement.

Disclaimer

This material has been prepared for information purposes only, should not be relied on for financial advice. You are requested to seek advice from your financial consultant for financial matters

#Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions. Tax Laws are subject to change from time to time. Customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.

ARN: ED/02/25/21885

For NRI Customers

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Call (All Days, Local charges apply)

Email ID

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(If you're our existing customer)

Call (Mon-Sat, 10am-9pm IST, Local Charges Apply)

Email ID

For Online Policy Purchase

(New and Ongoing Applications)

Call (All Days & Toll free)

Schedule a call

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Email

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For Existing Customers

(Issued Policy)

Whatsapp

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Fund Performance Check

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Retirement Plans FAQs

FAQs About Retirement and Pension