Proper retirement planning includes identifying monthly income sources once your regular cash flow stops when you reach your golden years. Meeting your needs and matching your current lifestyle after you retire is possible if you take advantage of different retirement plans for ongoing financial support. Keep reading to find out more about monthly income sources after retirement in India.
Knowing how to earn money after retirement in India is important if you want to remain independent in your golden years. There are a number of retirement plan options available for providing continuous income after you retire. Before deciding which plans to invest in, consider other factors such as your retirement goals and corpus.
Determining your retirement goals from an early age helps you to understand why putting aside savings for your later years does matter. Factors such as independence, what age you want to retire, meeting personal life dreams, and matching your current lifestyle should be considered when planning for your retirement.
Setting retirement goals allow you to calculate how much you need and to invest properly for a steady monthly income after you retire. Having benchmarks along the way commits you to save towards your retirement goals.
Retirement Corpus Calculators
Calculating your retirement corpus requires knowing the number of years you have until you retire, accounting for inflation, and estimating your daily and annual expenses in your golden years. You’ll need to know your life expectancy once you retire as well as income sources post-retirement.
Using retirement corpus calculators ensures you take into consideration all the necessary factors to get the correct amount required post-retirement. It’s a useful tool for planning your investments so that you get the required retirement corpus after you retire.
There are a number of retirement income sources for Indians to consider, allowing them to save and invest their money in preparation for retiring from work. Determining these options depends on your retirement goals and how much steady income you need when you retire.
Identifying potential sources of retirement income gives the retiree peace of mind their essential living expenses will be covered while factoring in unexpected costs such as medical bills.
Post-retirement income streams in India include both guaranteed and non-guaranteed sources.
With guaranteed returns on your savings or investments, these plans provide a steady income stream to support your financial needs in your retirement years.
When you reach your retirement, you want to kick back and relax knowing your rewards for a lifetime of hard work will see you comfortably through your golden years. Proper retirement income planning will ensure this happens and having a pension plan is one way of guaranteeing a secure future.
Purchasing a pension plan early in your career requires paying a regular premium which is invested into a fund determined by the policyholder. On retirement, the policy provider will pay out a lifetime pension to the retiree, guaranteeing a steady income post-retirement.
Backed by the Indian government, the National Pension Scheme (NPS) is a voluntary retirement scheme made available to citizens of India aged between 18 and 65 years old. It’s managed by the Pension Fund Regulatory and Development Authority (PFRDA) and lets working Indian citizens contribute to their retirement years.
It works by depositing 60 percent of the corpus into the applicant’s bank account on retirement while using the remaining 40 percent to purchase annuities. This generates a steady income stream for the retiree.
First introduced by the National Savings Institute of the Ministry of Finance in 1968, the Public Provident Fund (PPF) was established to offer Indians a tool for growing their savings. The scheme acts as a savings instrument, allowing small investors fair returns with income tax benefits.
This savings-cum-investment vehicle gives competitive interest rates with a 15-year tenure and tax deduction in line with Section 80C of the Income Tax Act. Other benefits include low-risk investments with guaranteed returns.
Another scheme backed by the Indian government is the Senior Citizen Savings Scheme (SCRS.) Designed to help you plan for your retirement years, the scheme is eligible for Indian senior citizens who are 60 years or older.
Its benefits include a higher interest rate compared to other savings plans, tax benefits, substantial returns, premature withdrawal options, and deposit amount flexibility.
If you’re investing in a mutual fund in India you most likely have the option of a Systematic Withdrawal Plan (SWP.) This feature lets the investor decide the amount they would like to withdraw from their mutual fund at fixed intervals.
The SWP allows the investor to continue investing in their mutual fund throughout their earning years while having the freedom to receive a steady income stream post-retirement.
Non-guaranteed income sources come with substantial returns but at a higher risk. Payouts aren’t guaranteed but diversifying your retirement investment is another way of generating income flow during your golden years.
Stock investments or dividends are designed to give you long-term growth while offsetting inflation effects. They give you the opportunity to benefit from robust market performance but investors are exposed to volatility at the same time.
Adding stock investments to your retirement portfolio can see you earning dividends well into your golden years. However, it shouldn’t be your only source of income as it does come with risks.
Unit-linked insurance plans (ULIPs) is a long-term investment approach to bolster your retirement portfolio. It includes dual benefits in that if offers both investment and insurance features. Providing both life cover and high returns, a ULIP is a viable option for growing your retirement wealth while offering protection at the same time.
Premiums are divided into two parts, with one part invested into funds and the other going toward the insurance component of the plan. Policyholders benefit from tax deductions on paid premiums in accordance with Section 80C of the Income Tax Act in India.
Investment diversification in retirement vehicles as well as within asset classes gives your overall financial portfolio a broad spectrum of income sources. Traditional asset classes include properties, equities, cash, and bonds. Identifying the right financial instrument for retirement income is vital when taking into consideration market fluctuations and risks.
Indian citizens can invest in government bonds, real estate, gold, mutual funds, or fixed deposits for growing their wealth with low- to high-risk features. Knowing your retirement goals and risk tolerance will help you decide which asset investments are right for your post-retirement needs.
Indian citizens have a number of options available to them when planning a steady monthly income for post-retirement purposes. However, getting the most benefits out of any of the options mentioned in this article requires planning early.
Planning ahead of time lets you make the right investments with your money, giving you peace of mind, you’ll have a steady monthly income after retirement. The more years you spend saving and investing your money, the more your wealth will accumulate for post-retirement. Make sure you invest in the best income sources for your retirement in India!
The rule of thumb is an amount equivalent to 70 to 80 percent of your total salary just before retirement to ensure you have sufficient monthly income when you retire. Calculating retirement income depends on variable and fixed expenses, earnings, health, and life expectancy rate.
The average monthly retirement income in India varies from person to person. Calculating this amount depends on a number of factors such as your age when you plan to retire and living expenses. Estimating the average monthly retirement income includes your living expenses, healthcare costs, luxuries such as holidays, and emergencies. Adjusting for inflation is vital to ensure you save enough for your retirement corpus investment.
Planning for your golden years should factor in the three pillars of retirement. These refer to government-administered schemes, employment-based pension plans, and personal retirement savings plan or policies. In India, citizens can invest in pension plans, NPS, SCSS, PPF, stock investments, assets, ULIPs, or SWPs as part of their retirement portfolio.
The best investment options after retirement in India include the Senior Citizen Savings Scheme, Government of India bonds, fixed deposits with high returns, or immediate annuity plans. Investing in low-risk savings or investment options with guaranteed returns is recommended when growing your money post-retirement.
According to the Indian Income Tax Act, 1961, all income is taxable including pensions. However, if you agree to a lump sum payout as a government employee you’re exempted from tax. Private individuals are given one-third of their lump sum payout tax-free. Provident fund returns are exempted from tax unless you invest in a private pension fund scheme.
Under the tax laws of the Indian government, a retirement pension is considered income. It’s taxed according to the income tax slab rates and retirement age. However, individuals under the age of 60 years old with an annual income of up to Rs. 2.5 Lakhs have a nil tax rate. The same applies to retired individuals between 60 to 80 years old earning an annual retirement income of up to Rs. 3 Lakhs.
Disclaimer:
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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