Retirement marks the end of your professional career, but it doesn’t mean that you may not have any goals to fulfil after you retire. Most of us would want to become financially independent to travel with their spouse, or start a business, or simply stay healthy and enjoy the golden years with their grandkids. Retirement, therefore, shouldn't just be about living longer alone. Nor should it be just about your savings outliving you. Rather, it should be you being able to ‘live like a king’, proverbially and afford it too!
It takes some planning and disciplined savings to be able to achieve all this. With this in mind, one question you should ask is how you will be able to become financially independent during retirement. The answer to your financial independence is the Guaranteed income plan.
A guaranteed income plan offers regular payouts, ensuring you continue to receive a steady income stream to fulfil your goals as well as cover essential expenses like healthcare, groceries, daily conveniences, and more.
Why financial stability is vital during golden years
Retirement is often seen as a time to relax. However, you will still need a substantial corpus or income to meet the costs.
Keep in mind a few essential expenses, such as:
a) Healthcare costs: Medical inflation in India has historically grown fast, reaching 14% annually. Assuming this trend is sustained, treatments will be significantly more expensive over time (doubles in 6 years).
Basic living costs don’t stop: Housing (rent or home purchase), groceries, and utilities continue to rise. Assuming the inflation rate averages 6%, everyday expenses could double in 12 years.
This is where investing in a guaranteed income plan, while you still have time is a smart move. It provides predictable payouts, shielding you from the unpredictability of market fluctuations or depleting savings. They can ensure you enjoy your golden years without compromising on your lifestyle.
How a guaranteed income plan works
It’s simple. Guaranteed income plans are life insurance plans offering a steady and predictable income along with the life cover. During your working years, you pay premiums towards the plan. In return, once the policy matures, it provides regular payouts for a pre-defined period or even for life. Some plans even allow you to customise payout structures to suit your needs. The distinguishing features of these plans are:
Reliability: Monthly or annual payouts act like a salary, helping you maintain your lifestyle. Some plans even let you choose an increasing income option, meaning your payouts rise by 5% annually to counter inflation.
Flexibility: You can decide how long you want to receive your income—anywhere from 5 to 30 years. If needed, there’s also an option to receive a lump sum payout at a discounted rate during the income period.
Protection: Since these plans are often linked to life insurance, your family gets financial security in your absence. Some plans even allow your nominee to continue receiving payouts instead of a lump sum in case of your demise.
Why choose a guaranteed income plan
While fixed deposits or mutual funds are popular choices for retirement, they often come with uncertainties.
Market-linked products fluctuate, and fixed-income instruments may not outpace inflation. A guaranteed income plan provides something priceless: certainty.
1. No market risks: Unlike investments tied to equity or debt, guaranteed income plan payouts are unaffected by market ups and downs.
2. Inflation protection: Some plans offer increasing payouts, helping you tackle the rising cost of living.
3. Customisation: You can tailor your plan by choosing when and how you receive your payouts. Some plans allow you to decide the percentage of your premiums that should be returned as a money-back benefit.
4. Peace of mind: Knowing that your retirement is financially secure brings a strong sense of calm.
Who should consider guaranteed income plans?
Anyone looking to secure their retirement, regardless of their life stage, can benefit. Whether you’re just starting your career or are a few years away from retirement, these plans can be tailored to suit your needs.
Take the case of Ramesh, aged 40, who wanted a worry-free retirement for himself and his wife. He opted for a guaranteed income plan, paying ₹1 lakh annually for 10 years. By the time he turned 60, he was assured of receiving ₹50,000 monthly for the next 20 years. This income gave him the confidence to enjoy retirement life without financial stress.
Steps to choose the right plan
Choosing a guaranteed income plan is straightforward. Keeping these pointers in mind can help you.
Know thyself: Calculate your estimated monthly expenses post-retirement.
Understand payouts: Look for flexibility in payout frequency and amount, including increasing payouts.
Evaluate the extras: Some plans offer bonuses, income boosters, and money-back benefits.
Shop wisely: Research trusted insurers offering comprehensive plans.
Mind the details: Understand the terms of maturity and payouts.
Start today
Retirement planning doesn’t have to be daunting. Start small, start early, and stay consistent. Your future self will thank you. So, why wait? Explore a guaranteed income plan today and turn those retirement dreams into a secure reality.
