Factors to Consider While Buying the Best Pension Plan in India


Retirement is the phase of life that most of us look forward to. We have a clear picture of what our retirement life would look like – delicious, exciting and stress-free. But even though we want it to be stress-free, how do we manage the finances?

Choosing the best retirement plan in India can save us from all our financial troubles. Investing in the best retirement plan in India comes with many benefits. For starters, it ensures a steady stream of income, financial freedom, tax benefits, and death benefits, to name a few.

But the question remains, how to find the best pension scheme in India? What are the factors we need to consider?

Well, if wrestling sounds familiar, we’re here to help.

Factors to Consider While Buying the Best Pension Plan in India

  1. Your monetary need

Underestimating your monetary needs can be embarrassing for you and your family. Thus, don’t pick any number without doing your fair share of research. In other words, come to a conclusion only after carefully analyzing your financial situation, monthly expenses, necessary expenses and possible future expenses.

Here are some helpful tips:

  • Start tracking your spending if you haven’t started yet.
  • Once you’ve started tracking, calculate your annual expenses.

Once you get an annual figure, you’re ready to start. You can now create a cost estimate of your post-requirement lifetime. While you’re at it, don’t forget to factor in medical bills, medical emergencies, debts, and other expenses. Once you hit a number, aim higher for coverage.

Since a retirement plan comes with debt benefits, make sure it’s also enough to meet your family’s needs.

  1. Inflation rate

Inflation can never be constant. It will always be on the rise. It would be a terrible idea to ignore it when calculating your future expenses or buying a new retirement plan. Ideally, the inflation rate should be lower than the rate of return, as inflation can significantly affect the value of your corpus if not mitigated. You can take an inflation rate of 5 to 6% to calculate your need for coverage.

  1. Interest rate

Different pension plans have different rates of return. You cannot use a single interest rate or return for all the investment and retirement plans you are considering. An inaccurate estimate of the rate of return or interest can make your investment and savings inadequate. It is therefore preferable to use the interest rate of the investment plan you have chosen rather than opting for a general figure.

If you can’t estimate the rate of return for your preferred retirement plan, use an online calculator to make the estimate.

  1. Guaranteed income

You may be able to afford to take risks now that you are in the income phase of life, but once you retire your appetite for risk will diminish. Opting for a pension plan with increased risk factors will not be a good idea financially. Thus, safe and wise retirement planning would consist of opting for retirement plans that offer guaranteed returns or income.

  1. Plan comparison

Ideally, the first retirement plan on the table shouldn’t be your first choice. A pension plan is a long-term investment that defines your retirement life. You cannot afford to choose a plan that is not suitable for you or that does not offer you higher returns than other plans. So, keep your haste at bay and analyze the returns of each plan before choosing the best retirement plan in India for yourself.

  1. Vesting period

An employee cannot obtain the rights of his pension fund shared with the employer before a fixed period. This is called the vesting period.

In the context of pension plans purchased through insurance companies, the vesting period or vesting age is the age at which you begin to receive stable income that is part of your pension plan. . For some plans, the vesting age may be 40-45, and for others it may be 60-70.

So, it is important to know what you want. The best retirement plan in India that would best suit you would be based on this decision.

To note:

You don’t have to wait until you reach 40 before buying the best pension plan in India. The earliest would be best. If you start earlier, you will be able to accumulate more funds. Studies suggest that between 2015 and 2050, the population aged 60 and over will grow by 171%, significantly outpacing total population growth by an astonishing margin. Therefore, a concrete plan must be put in place to help maintain the lifestyle standards of this part of the population.


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