Today, we are all living our lives comfortably, exactly like we want to, and what we don’t often realise is that our body and mind won’t be active as it is today. At this young age, living our lives to the fullest is of top priority, and while focusing on the present many of us forget that planning for the future is also important.
This is where the pension planner comes in. It allows you to plan for the future without compromising on your present needs. To plan for our retirement is to plan for your future, and a few years down the line, you will be grateful that you did so. Using a pension planner is not only about considering your needs in old age but also your dependents’ that may need financial assistance from you in the future.
Having a pension planner will allow you to have a regular source of income even after your monthly salary stops. What could be better than this?
And if you want to start investing in your retirement corpus today, keep on reading!
- The basics of a pension plan
- Importance and benefits of a pension planner
- Tips before getting a pension plan
- How to use a basic pension calculator
Learn the ABCs of a Pension Plan
We’ve all heard of Pension Plans, but have you thought of learning more about how they actually work and what their benefits are? Let us get into the details!
To explain in simple terms, a pension planner is required when you are looking for a long-term investment plan. You will be asked to pay small premiums regularly which will help you to build a retirement corpus.
There are many benefits to this apart from offering security to you in the long term. The one thing that many young people struggle with is having fiscal discipline and having a pension planner can inculcate the habit of saving a percentage of your salary every month.
Steady Income, Financial Freedom and Much More: Benefits of Pension Plans
The key to a happy and healthy retired life is having a pension planner. Once you have a pension plan calculator you can easily save monthly for a comfortable retirement. There are many benefits of having a basic pension calculator and a pension planner. If you are eager to know about some of them, keep reading!
If you have a pension planner, then you are guaranteed to have a regular income that would allow you to maintain your current lifestyle and be financially stable. A pension planner can help you build a sustainable retirement corpus if you start saving from an early age like your from your twenties.
With saving a part of your salary every month, there is no denying that your money will add up over the years, but another benefit of the pension planner is that your money will compound and grow with the ROI which would result in a sustainable if not huge retirement corpus.
Savings On Tax
It is a lesser-known fact that under the Income Tax Act, 1961, sections 80C, 80CCC and 80CCD, tax exemptions are allowed. Which means that with a pension planner you can save your tax money efficiently.
Build A Savings Habit
With a pension planner you would be required to make small but regular premiums towards your retirement fund. This would help build discipline and make you more proficient in handling your finances.
Quick Tips for Buying a Pension Plan
By now, you must have an in-depth understanding of why having a pension planner is important and why we all should start investing in our future selves today. But solely learning about its importance is not enough, there also some other things that you must keep in mind before you start with a pension planner.
If you are interested in building a retirement corpus, we have some tips for you!
When using a pension planner, time is of prime importance. If there’s one thing we know about investing it’s the fact that the earlier you start, the better returns you will be getting in the future.
Look For a Health Cover
While using a pension planner, you must also look for a plan with a health cover as prioritising our health becomes super important once we reach a certain age. So, having a health cover that can shield you from long hospital bills is crucial.
Rid Yourself of Debts
Retirement is a time of life where your body and mind should be at peace. During these years, having your mind stressed with the never-ending cycles of rents, loans, and debts should not be the case. So, you must focus on paying all loans in your early years so that you can have a stress-free retirement.
How to Use a Pension Planner aka Pension Calculator
To keep track of your monthly salary and how much you need to save for retirement, having a monthly pension calculator is crucial. This will give you a better understanding of how much you should save and for how many years.
Now, let’s move on to the process of using the pension plan calculator. You can keep a monthly pension calculator that can understand your financial needs which will then fulfil your financial needs of the future.
If you are wondering about how to calculate pension, then you can use the various online calculators that use the basic pension formula to calculate your savings and interest.
Here are the simple steps you can follow!
- Search online for a basic pension calculator
- Fill in the details required
(DOB, time of accommodation, your age and age of retirement expected)
- Fill in the details of your income
- Add in your saving details as well
If you want to calculate your pension on your own, this can be done with a pension calculation formula as well. This basic pension formula is based on the years of your service and your pensionable salary. So, the longer you’ll be working the higher your amount will be according to your pension planner.
The most widely used formula is here for your reference.
(Pensionable salary × Pensionable service)/ 70
If you want to know how to calculate the commute of pension, then here is the formula you can use:
Pension commutation formula = Amount of 1 to be commuted x 12 x purchase value for age till next birthday
Once you use the pension plan calculator and get your results, you can increase or decrease your monthly contributions to the pension plan according to your needs. Your retirement age can also be altered if you think you need more time to have substantial savings.
Word to Remember
Return on Investment or ROI is a simple measure of performance of a certain investment that you make. It assesses the profitability and efficiency of all your investments, so you have a better understanding of the same.
While using a basic pension calculator the ROI can tell you how much your money will grow over the years with the interest rate that is given to you according to the scheme.
In your twenties retirement may seem like a far-fetched idea and using a pension planner may not even cross our minds. This is because in our youth, our priorities are different, and nobody wants to put money into their retirement fund. However, this should not be the case.
Even if you think that your old age is far away, and you will have enough money to sustain your current lifestyle in the future, having a pension planner is super important.
No one wants to be a liability and depend on someone else in their last years, so why not start planning today, to have a luxurious retirement you always dreamed of?
As a government employee, you will be entitled to a fixed pension which you will be informed about beforehand. However, for private employees, a pension is not guaranteed. You will only be eligible for a pension if you are registered under the Employees’ Pension Scheme (EPS)
There are a number of factors that influence how much money you should have. The best way to assess this is to calculate it through a pension planner. You will also need to consider the following things.
Your average monthly expenses upon retirement
What you plan to do post-retirement
Dependents that need your financial support
Emergencies that may require financial assistance
In most general cases, according to your pension planner, money should not be withdrawn from the account before the age of retirement I.e., 59 and a half according to the IRS. However, in case of emergencies like a sudden disability or payment of medical bills, withdrawals are allowed.
According to the pension planner, you have the option to surrender your pension plan before its maturity. In most cases your money will be added to your yearly income and regular taxes will have to be paid accordingly.
Read more about Pension Funds.