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While you are working hard towards providing your family with all the comforts life has to offer. How do you ensure that it continues even after your retirement?
You need to build an adequate corpus that will generate a regular income after retirement once your salary income stops. A small investment towards your retirement corpus would help you accumulate the required corpus. But you would also like to have a safety net against market volatility so that your savings are not wiped out and therefore retirement or pension plans comes into picture.
The first is the accumulation phase, during which you pay premiums and the money accumulates through the tenure of the plan. The accumulated money is then invested in securities approved by the Insurance Regulatory and Development Authority (IRDA ), the insurance regulator.
These products are designed to protect the value of your principal while at the same time provide you with steady returns. The accumulation stage is followed by the vesting age, which is the age when you start getting payouts from the kitty. This can be selected by you. The vesting age in most plans is 40 to 70 years. The period when a person gets pension is also called the annuity phase. During this phase, you can withdraw up to 33% of the accumulated amount in one go. The rest is paid as pension.