Planning for retirement early in your career allows you to build up a corpus large enough to give you a regular income post-retirement.
Gone are those good old days when the thought of retiring at age 60 seemed like fulfilling life achievement. The trend now is towards a much more active retirement. People today retire far differently than they did in the past and have a very exciting and compelling vision of retiring – a highly personalized.
In the past, people could almost live on their social security benefits and pensions. But this doesn’t apply anymore as people nowadays don’t fully rely on their social security benefits to fund their retirement lifestyle. As now, even after retirement a person’s need for stable income stays the same and may even increase owing to the added medical bills. Whether you want to accomplish new objectives or you want a relaxed and comfortable life, the critical factor is having adequate financial support that offers a regular income which takes care of your health care costs, daily expenses and ensure that you are able to maintain your standard of living.
However, to achieve this the most important thing that is lagging behind is the need to plan ahead in advance. To ensure a stress-free retirement period, the due planning has to be done much earlier. Planning for retirement early in your career allows you to build up a corpus large enough to give you a regular income post-retirement. Choosing a pension plan with the required features allows you to enjoy retirement coverage with the benefits involved. This is where the new age Whole life ULIPs can help you. Let us see how they work.
Whole-life ULIPs are investment linked insurance plans that offer protection and investment benefit, till the age of 99 to 100 years. These are the plans which not only take care of providing your beneficiaries with the death benefit, but also take cares of your living needs during your retirement. You have the flexibility to enter into Whole Life ULIPs at any age between 18 and 100 years and can exit at any age. You can also choose till what age you want to save money, or accumulate money. This could be till your retirement. But the 5-year lock-in period remains the same after which you can choose to take the corpus through a systematic withdrawal plan which will act as your income in the retirement age. Some of the companies that offer Whole Life ULIPs with various benefits to their policyholders are Bajaj Allianz- Longlife Goal, HDFC Life – Click2Wealth, Canara HSBC Oriental – Invest 4G – Whole Life.
Benefits in Detail: Whole Life ULIP
# Death Benefit
The primary benefit to have Whole Life ULIPs in your investment portfolio is the life cover till the age of 99 years ensuring a greater scope for the family of insured. In the unfortunate event of death of the life assured, family gets the financial compensation against the loss of income arising from the potential loss of your life. This means that it offers risk coverage for the entire life and there is no date of expiry of your policy. Regardless of when you die, your beneficiaries are sure to receive the total sum assured.
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# Partial/Fully Withdrawal Benefit (Tax Free)
This facility is specially designed to help you provide liquidity so that any immediate financial needs can be met. The financial needs can be higher education of your child or his/her marriage. However, you are eligible to avail this feature any time after the completion of 5 policy years. You can make unlimited number of partial withdrawals or even 100% withdrawal at a time depending on your need. Also, you can withdraw 100% of the funds tax free which means tax free income upon retirement of life.
# Maturity Benefit
The maturity benefit you will receive at your retirement totally depends at what age you start. For instance, if at age of 60 years if you expect your corpus to be around Rs 5 crore, then you need start investing in Whole Life ULIP at least by the age of 35 years. And the amount that you would be needed to invest per month till 60 years is Rs 28,000 p.m. On maturity of the policy, you will receive the Fund Value including the Top-up Fund Value, if any. You have the option to receive the Maturity Benefit either as a lump sum or as a structured pay-out using Settlement Option.
# New Age ULIPs have Minimal Charges
That said, before you invest in Whole Life ULIP here are certain charges you need to keep in mind which you can pay over the entire tenure to get the most suitable ULIP insurance for yourself. ULIPs have four broad categories of charges, that is premium allocation charge, fund management charge, policy administration charge and mortality charge. After the new regulations by IRDAI, there has been certain changes in how these charges are applied now. With the launch of ULIPs in the online market, there are charges for premium allocation and policy administration charges as there is no mediator involved. Also, at maturity date, the amount equal to total of mortality charges and policy administration charges deducted in the policy will be added to the fund value, provided all due premiums have been received. The amount will be allocated among the funds in the same proportion as the value of total units held in each fund at the time of allocation. This shall exclude any extra mortality charges and taxes levied on the charges deducted as per prevailing tax laws. Also with time, FMS charges got capped at 1.35% per annum.
# Flexibility to increase/decrease pension anytime
Depending on your needs or in case of any financial emergency, you can anytime increase or decrease your pension. This is a specialised benefit designed for people looking for flexibility in later stages of their life. However, if you opt for pension products life immediate annuity for your retirement purpose, then you won’t have a choice to decrease or increase your pension like you have in a whole life ULIP.
(By Santosh Agarwal, Chief Business Officer-Life Insurance, Policybazaar.com)
(Disclaimer: These are the views of the author. Readers are requested to consult their financial advisor before investing in any product)