Importance of Retirement Planning

Securing a financially comfortable retirement is a top priority for many. After years of hard work, the golden years of retirement promise relaxation and well-deserved leisure. However, a secure retirement doesn’t happen by chance; it requires careful planning. Retirement planning is about ensuring financial stability during your retirement years, and starting early is the key to success. In this blog, we’ll explore the importance of retirement planning, the different types of retirement plans available, and offer practical tips to help you secure your financial future.

What is Retirement Planning?

Retirement planning is all about preparing today for your future life so that you can fulfil all your dreams in old age independently. Thus, retirement planning means stating your retirement planning goals, estimating the amount of money you might need, and investing in growing retirement savings. Each retirement plan is unique, and it’s important to have a plan designed especially to cater to your individual needs.

Why Plan for Retirement?

You retire from work, not your life. You may have a new set of dreams for your post-retirement life, and at the same time, you would also like to continue your day-to-day lifestyle without thinking about expenses. You can define the path to achieve these life goals well in advance, with no financial dependence, if you plan for it in advance. Here are some reasons why retirement planning is very important:

1. Maintain Standard of Living: You want your current lifestyle to continue even after retirement. Today, these expenses are covered by your monthly income. After retirement, you can plan for a regular income to cover your daily expenses. This is because people, on average, live longer these days. You may need to save way more for post-retirement expenses. In this respect, you can make all the arrangements well in advance to ensure post-retirement income for a lengthier time.
2. Be Prepared for Emergencies: You would not want to depend on anybody in case of any financial emergency or meeting medical expenses. With an appropriate retirement plan, you can have an emergency fund, which helps you be prepared for any eventuality.
3. Fulfil Retirement Goals: Retirement is a new lease on life wherein you can fulfil goals like going on trips to new places, picking up a hobby, or even starting a venture.
4. Fight Inflation: According to the Consumer Price Index, the prices of consumer goods in India surged 6.2% in 2020. It will result in you leading a deteriorating quality of life. By retirement planning, you can invest well in advance, letting your money grow and outpace inflation.
5. Leave a Legacy: You have worked hard to build a life of comfort for your family. You want to make sure this comfort lasts for years to come, even in your absence. When you plan for your retirement and build your retirement savings, you can plan to leave behind wealth for your family, too.

Types of Retirement Plans

Retirement planning in India can be done through several retirement schemes that provide a regular income stream to sustain a particular style of living post-retirement. Some of the common types of retirement planning are as follows:

1. Annuity Plans: Annuity plans are designed to pay regular monthly instalments to the retired individual.
2. Senior Citizen Savings Scheme: This Government-backed scheme provides regular income to those 60 years of age or older. You can invest as low as Rs. 1,000 in a year, while the maximum investment is Rs. 15 lakh.
3. National Pension System (NPS): NPS can be extended to people between 18 and 70 years old. The NPS tax benefits under this plan go up to Rs. 2 lakhs in a financial year. ICICI Bank presents the most sought-after option for NPS, wherein you can choose from various asset classes, including Equities, Debt, and Alternative Investments. The plan also provides a range of benefits, including tax deductions, flexibility in investment choices, and a range of annuity options. 

Advantages of Retirement Planning

The benefits of retirement planning are as follows:

1. Life expectancy: Today’s average life expectancy is 70-75 years, meaning if you retire at 60 years, you still have quite a few years of retirement when you would need regular income.
2. Medical costs: With increasing costs for medical treatments, you must have an emergency corpus in place.
3. Tax benefits: Good retirement planning can help reduce the liability of paying taxes as covered under Sec 80C of the Income Tax Act, 1961, and maximise your savings.
4. Peace of mind: A well-planned retirement will keep you happy and healthy and prevent you from being stressed out about financial problems.

Retirement Planning with ICICI Bank’s National Pension Scheme

Retirement planning is considered an important way to ensure a comfortable future. ICICI Bank’s NPS is a good retirement planning option for the following reasons: 

• Tax Benefits: With NPS, you can claim an additional deduction of up to Rs. 50,000 under 80CCD(1B) over and above the deduction of up to Rs. 1.50 lakh under 80C.

• Retirement Benefits: NPS secures your retirement by giving you a lump sum income at your retirement age and an attractive monthly pension after retirement.
• Investment Benefit: Using compounding power, NPS can give you maximum and better return on investment.
• Cost Benefit: NPS is a low-cost retirement product with only 0.01 % cost investment every year.

Opening and maintaining an NPS account with ICICI Bank is an effortless process that can be done through the iMobile Pay app or Net Banking.

Conclusion

Planning your retirement is essential for a secure future. Start early, choose the right retirement plan, and contribute regularly to ensure a stress-free retirement.