Retirement planning

In earlier articles we have been discussing the benefits of savings through GPF available to R&D institution under the Govt.
Recently I read an article about a Survey undertaken amongst salaried IT/ITES employees by Right Horizons, an investment advisory and wealth management firm.

The survey throws in many surprises.

The survey revealed interesting facts about how they plan thier taxes, medical insurance, life insurance and investments.

The most interesting and shocking reveleation from the survey is that 95% of the respondents having an average age of 26 years did not invest inmedical insurance.

95% of IT/ITES respondents were not covered by medical insurance at all.

Even among the ones that were covered under medical inaurance, most of them were covered because their employers deducted premium at source.

81% of them did not utilize full tax benefit under section 80 C ,as less as 5 % invested their

money in tax saving equity linked savings scheme.

Among persons using partial tax savings, the survey observes , Company PF accounted for 30% in value terms.

This article throws in many questions.

This survey correctly points out the declining savings habit among the youngster in the MNCs and many of them even not availing the full tax benefit under section 80 C.

Whether they will be able to continue their lifestyle after retirement?

How are they going to support themselves after retirement?

In such a scenario, the question about retirement planning arises. Everyone is aware that retirement planning is nothing but having sufficient money during one's late years after retirement to support himself and lead a respectable life. .

If you see any financial dailies or news channel, there is much talk about retirement Planning. What is retirement planning and how does it work?
When an individual opts for a pension plan, he has to pay a fixed amount, known as the Premium, to the insurance company over a pre-determined period of time known as the term of the policy.

After his retirement known as vesting age, he will be provided with 1/3 of corpus accumulated as lump sum payment and balance amount is converted into a monthly income ,known as annuity. This schemes is offered by many players, while LIC offers traditional pension plans, private insurance companies offer ULIP(unit linked insurance plan )which is based on equity.

We will see how these schemes operate to understand the pension benefits given by Govt.