Retirement is the time in life when you can finally relax and work on your dreams. However, it can be a challenging time if you don’t have the finances to live a life without doing anything. This is why people save for a pension while they are working. You need to understand what is pension and how pension plans might improve your life.
What Is Pension?
Pension is income earned during your retired life. However, it does not come easily. You need to plan for it throughout your working years to ensure a decent income during your sunset years. You can select a pension policy under the personal life insurance policies of an insurance company. There are many such policies. You just need to make sure that your investment keeps on growing through regular amounts contributed and returns earned. Moreover, you need to make sure that you are planning for your retirement at an early age. This helps to rake in a huge sum through accumulations over a long time.
Types of Pension Plans
Broadly speaking, pension plans can be of two types – sponsored and personal. So, if you have a pension plan for which the employer is paying the premium, it is a sponsored pension plan. However, the employer may deduct a certain sum towards the premium. If you desire a higher contribution than the employer is making on behalf of you, ask HR if it is permissible to contribute more by deducting a higher amount from your salary. You can also have a personal life insurance pension policy to make sure that you have a fund to survive on during your twilight years. However, for such a policy you need to contribute the premium completely.
How Pension Plans Might Improve Your Life?
Pension plans are meant to improve your life when you are no longer able to work due to age or disability. However, there are various types of them. You can choose one that suits your present financial condition best. Two of the most common types of pension plans are deferred annuity and immediate annuity.
- Deferred Annuity plan
A deferred annuity plan is about creating a fund through regular or one-time premium payment. You receive a pension after completing the policy term. Such policies also offer the benefit of tax exemption.
- Immediate Annuity
This is about depositing lump-sum money in a pension plan under the personal life insurance policies of an insurance company and securing a monthly pension starting the very next month or a few months thereafter.
So, if you are comfortable with accumulating a big sum of money and utilizing it to buy an insurance policy, you can go for an immediate annuity. Otherwise, a deferred annuity plan may help you improve your retired life.
Summing Up
Needless to say, the perfect pension plan for you is the one that best takes care of your apprehensions about your future. You can get personal life insurance pension plans with life cover. These policies offer pension as well as secure the old age of your spouse. You can also get guaranteed annuity plans, policies with a return of purchase price clause, and more. In essence, there are different types of policies irrespective of whether it is a deferred annuity or an immediate annuity plan.