The insurance business in India isn’t just growing, it’s also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.
What is the right age to start planning for one’s retirement?
The key to successful retirement planning is to start early. Some key points to take into consideration when planning for retirement:
• Growing medical needs
Hence, it is advisable to think about retirement in the early earning years when there is no pressure to support a growing family and you don’t have high medical expenses.
There is a “cost of delay” in terms of increase in the initial premiums required, even if the pension planning is delayed by a year. For example, a 30-year-old man with a target retirement fund of Rs15 lakh, wishing to retire at the age of 58, has to start investing at Rs11,876 per annum. However, if he delays this by one year and starts investing at the age of 31, he will have to pay Rs12,995 per annum for the same accumulated amount of Rs15 lakh (increase of 9.43%). This is based on a net investment return of 6% and an assumed increase in income of 5%.
Are there any insurance plans for specific purposes or needs?
Yes, one can buy an insurance plan for particular needs. For example, pension plans help one save and get regular income at the time of retirement; child plans help one save and get benefits to meet a child’s higher education, marriage or business needs; term assurance plans help protect a family against loss of income upon the policyholder’s unfortunate death; endowment/whole life plans help one get both protection and savings benefits; and unit-linked plans help one save and get market-related benefits.
Depending upon individual need and risk appetite, one can choose an insurance plan.
Readers are welcome to write in with their queries to firstname.lastname@example.org. The questions will be answered by senior executives from leading insurance firms.
This week’s expert is T.R. Ramachandran, managing director and CEO, Aviva India.