Types of Retirement Plans
Planning for retirement early can secure a comfortable and worry-free future. India offers several retirement plan options to suit different preferences and risk levels. By choosing the right retirement plan, you can ensure a steady income once you stop working. What’s more, many plans also offer life cover which means you can enjoy dual benefits – financial protection as well as savings. Let’s explore the main types of retirement plans available.
1. National Pension System (NPS)
The National Pension System is a government-backed retirement plan offering investments in equity, bonds, and government securities. It gives both market-linked growth and tax benefits. You can use a retirement calculator in India to estimate how much corpus you will build based on your monthly contributions.
2. Public Provident Fund (PPF)
A PPF account is a long-term, government-guaranteed savings option. With a 15-year tenure and tax-free interest, it is an ideal retirement plan for conservative investors. Once the 15-year period ends, you can extend the plan in blocks of five years.
PPF and NPS fall under the E-E-E (exempt-exempt-exempt) category. This means that the contributions made, the interest earned, and the maturity proceeds, are all tax-free under prevailing tax laws.**
3. Annuity Plans
Annuity plans, offered by insurance companies, can help you convert your savings into regular post-retirement income. You can choose an immediate annuity (starts income right away) or deferred annuity (income begins after a waiting period). Some plans offer lifetime payouts, while others offer returns for a fixed term. An annuity retirement plan often includes life insurance, which means that not only do you get a secure monthly income after retirement but can also enjoy peace of mind about your family’s future.
4. Unit-linked Insurance Plans (ULIPs)
ULIPs combine life insurance with market-linked investment. While riskier than PPF or annuities, they offer the added benefit of life insurance within the same plan. ULIPs also offer various tax benefits; however, the benefits are subject to several terms and conditions.
5. Pension Plans from Insurance Companies
These pension plans can provide a mix of insurance and savings. You can enjoy a lumpsum at maturity and a regular pension afterward. Many of these often include life insurance benefits and help you maintain financial security post-retirement.
6. Voluntary Provident Fund (VPF)
A voluntary extension of the Employee Provident Fund, VPF lets salaried individuals contribute more to their provident account. If you have extra funds each month you wish to contribute to a PF account, VPF can be the right choice. It yields returns similar to EPF and also falls under the E-E-E- category. However, if the funds are withdrawn within 5 years of investing, the money will be eligible for taxation.**
Make sure to get correct estimates of returns with the retirement calculator in India to avoid premature withdrawals.
7. Senior Citizen Savings Scheme (SCSS)
Available to individuals over 60, SCSS offers solid interest rates and quarterly payouts. Though it has a five-year lock-in/ maturity period, premature withdrawal is allowed with a penalty. It can provide secure returns and helps support retirees in ensuring a worry-free retirement.
Choosing the right retirement plan, whether NPS for market exposure, VPF for regular savings, or ULIPs for investment‑plus-insurance, depends on your risk tolerance, income, and goals. Consider opting for plans featuring life insurance for added protection. You can also combine different types of plans to build a diversified, reliable retirement strategy. Take action today to secure your financial independence tomorrow.
** Tax exemptions are as per applicable tax laws from time to time.
