Tuesday, December 10, 2013

What are Retirement plans

Retirement Plans offered by life insurance companies are bundled products, offering the benefits of both insurance and investment. A typical retirement plan has two phases. 

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.

In the immediate annuity option, a person can pay in lump-sum, instead of over the years, and start getting income immediately. The frequency of payments received can be monthly, quarterly, half-yearly or annually.


*TERMS YOU NEED TO KNOW*

VESTING AGE: The age at which you choose to start receiving pension.

ANNUITY: Regular monthly pension payable to you after your cross the vesting age.

SUM ASSURED: The amount that the nominee receives in the event of death of the insured during the accumulation period.

ACCUMULATION PERIOD: This is the period when you pay premiums to accumulate funds for retirement.

SURRENDER CHARES: Charges levied by the insurer if you end the policy before the date of vesting.

PARTICIPATING PLANS: These plans give a share of the insurer's profit to policy holders. This share is not fixed and depends on the financial performance of the company.


To know more read the full article here    
                                                               

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