Retirement brings an end to our employment life. But in order to maintain our standard of living, we need a steady flow of income after retirement. There are a number of public as well private insurance companies that offer different types of pension plans to take care of our expenses post-retirement. These pension plans not only come with many interesting features and benefits, but they are also good tax-saving instruments too. Here we will discuss the pension plans in detail along with the tax benefits they offer.

A brief introduction of pension plans

Pension plans, also known as annuity plans, is an integral part of retirement planning. However, not everyone has the foresight to prepare ahead, which is where organizations like Walker Capital Preservation Group (walkercpg.com/) or other similar firms’ comprehensive retirement planning could help.

Pension plans are like savings plans that allow you to accumulate money throughout a certain period of time. You are allowed to choose the end date of the policy term. It is not necessary that the end date (also known as the vesting date) always has to be after your retirement. The vesting date can be much before your retirement. But, since it is for retirement that the corpus is being built, people choose the vesting date to be right after their retirement date.

From the vesting date, the policyholder starts receiving their pensions. The pension can be used to live an elegant life, pay bills, take care of regular expenses, travel, or invest in a retirement community real estate such as https://55next.com/all-communities/oak-run/ or equivalent company websites. Retirees may also have prior investments and passive income sources to maintain a comfortable lifestyle; however, a pension plan can ensure you will never have monetary issues, even if you encounter losses in the investments.

In a nutshell, pension plans promise you a steady stream of income after your retirement. This can be incredibly useful for you if you are considering living arrangements such as the ones potentially found online at Chelsea Senior Living official website and other assisted living home pages, where you may want to have a steady stream of income to possibly cover any costs.

Different types of pension plans

You can make a successful retirement planning based on your requirements and financial goals. Hence, based on your requirements, you can choose from a number of pension plans available in the market. Some of them are discussed below:

Immediate annuity plans

Immediate annuity plan is a type of investment plan in which you make your payment only once in lump sum. You start receiving pensions immediately after the payment. You can choose the frequency of your pay-out based on your requirements. This plan is ideal for those who are about to retire or have already retired. However, the only one drawback of this type of retirement plan is that, you cannot withdraw the money you invested. Only in case of your death, your nominee will receive the total purchase price back.

Deferred Annuity plan

Deferred annuity plans are like retirement savings plans. In savings plans like this, you accumulate your money throughout the policy term and you receive the plan once the policy receives maturity. Deferred annuity pension plans allow you to withdraw one-third of the corpus in case of emergencies, in case you decide to sell life annuity. However, in the event of your unfortunate decease, your nominee will receive the sum assured as the life cover.

There are mainly two types of deferred annuity plans are available in the market:

Traditional deferred annuity plans

Traditional pension plans are best for risk-averse investors. In a traditional deferred annuity plan, your money is mostly invested in Government securities and other debt instruments the risk profile of which is considered lower. These plans can be defined as savings plans with investment benefits.

Unit-linked deferred annuity plans

Non-traditional or unit-linked pension plans are those that give market-linked returns. These plans are considered riskier than traditional plans as in unit-linked plans, the money gets invested in equities and equity related products, stock markets etc. However, you can plan your retirement planning strategically by allocating your money in various funds with different risk profiles as this will allow you to make your investment less risky.

Income tax benefits with retirement planning

Pension plans, as said earlier, are investment cum savings plans with income tax benefits. However, the tax benefits may vary depending on the type of plan chosen by you. The tax benefits offered under section 80CCC were designed by the government of India to encourage the people to invest in pension plans. As per this section, whatever you contribute to your retirement funds will be deducted from your gross income. This will exempt you from paying taxes on this amount. The maximum permitted deduction on investment in the year 2015 was Rs. 1.5 lakhs per year. Moreover, you can withdraw up to one third of your retirement corpus and you do not have to pay income tax on that.

The success of your retirement planning depends a lot on how early you start planning. It is always better to invest in savings plans or in pension plans as they are the safest investment instruments as well as provide life coverage. They offer income tax benefits as well. So, if you are planning for your retirement, purchase a pension plan that offers annuities for life. This will keep you happy and financially independent throughout your post-retirement life.