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Introduction
Retirement is a good time to re-assess your life insurance needs to ensure that they accurately reflect your new stage in life. Because you may no longer want your insurance to replace your salaried income, nor do you have any loans or liabilities and nor do you have to worry about providing for your children’s higher education and marriage expenses (hopefully). In fact, you may now be focused on being financially independent - ensuring that you and your spouse are not dependent on your children for your finances at least.
Insurance and Retirements
When you retire, it is time to re-evaluate your insurance coverage. Because your financial responsibilities and priorities are changing, your insurance needs change as well. Your monthly income declines as you stop earning your salary. Your household expenditure declines as you incur lower expenses on commuting, clothing and eating-out. You may be in a lower income tax bracket. With so many changes in your financial position, you need to ensure that your avenues to retirement are as secured as your life has been.
Pension products
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Insurance companies offer pension products that allow the individual to receive pension immediately or to receive pension at a certain age.
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During the term of the policy, the individual remains insured.
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Upon his death, his spouse or nominee have the option of either receiving a monthly pension for a guaranteed term (which would have been selected by the insured) or receiving a lump sum amount, where the policy ceases.
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Usually these policies allow individuals to pay money on a regular basis as premium or even accept single premiums, where only one payment is made.
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Moreover, some of the pension policies offer tax benefits, under section 10CCC, which are not available on any other products.
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However, keep in mind that the premium paid for such a policy may offer tax benefits, the money received as pension is subject to being taxed.
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Attained Retirement! Almost?
If you have just reached retirement or are just about to retire in the near term, and are still making plans to sort your finances, here are a few points that you may consider.
Sort out all your savings from various sources
Create an account of your receivables
The lump sum amount of money receivable amount over a period of time
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Employer’s Provident Fund |
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PPF money that may have accumulated over the years |
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NSC, Infra-bonds, FDs that may be ready to mature |
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Insurance policies that are likely to mature soon
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| The money you expect to receive on a regular basis such as |
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Pension from your annuity policies |
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Pension from your ex-employer |
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Income from your Regular Income Funds
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Estimate your expenses
Create an account of your anticipated expenses (hopefully, you have no loans or liabilities) |
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Monthly household expenditure- include a 10% buffer for unexpected medicine bills
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Contingency fund for the month (an unexpected holiday to your grand-daughter’s birthday party or a sudden fit to go on a pilgrim with your neighbor)
Ensure that your expenses include money for routine medical check-ups, insurance payments, entertainment / vacation savings (in the same order of priority).
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Contingency fund - Create a contingency fund for you and your spouse, which could be used in case of any sudden medical needs.
Health insurance - Ensure that you and your spouse remain covered through a health insurance policy. Also, ensure that the amount you are covered for is not a small amount such as Rs 25,000 or Rs 50,000.
Pension products - Ensure that your spouse can deal with your monthly expenses, in your absence, through the pension that you receive. If you are not insured for the same, you could still do that through pension products that offer pension immediately.
Well, if you have most of the above in place, all you need to do is put your feet and relax!!! Have a nice time!!!
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