Retirement Planning
Make the most of your retired life!
You have worked hard and built a life for yourself and your
family—one full of dreams, achievements, and happiness. Now, as you
near retirement, you may have new dreams and goals in mind.
You may want to spend more quality time with your loved ones or
travel the world. You may also want to fulfil commitments like your
child’s higher education or wedding.
With a little retirement planning, you have the power to fulfil your
wishes while maintaining your financial independence.
On this page, we cover all aspects of retirement planning.
- What is retirement planning? - Why plan for retirement? - How Much Do You Need to Retire? - Advantages of retirement plans - Importance of a retirement plan - A step-by-step guide to retirement planning - Where to invest for retirement? - Types of retirement plans - Retirement Planning Stages - How retirement plans work? - Tips for retirement planning - Factors to keep in mind while planning for retirement
What is
retirement planning?
Retirement planning means preparing today for your future life so
that you continue to meet all your goals and dreams independently.
This includes setting your retirement goals, estimating the amount
of money you will need, and investing to grow your retirement
savings.
Every retirement plan is unique. After all, you may have very
specific ideas on how you want to spend your retired life. This is
why it’s important to have a plan that is designed specifically to
suit your individual needs.
Why
plan for retirement?
You retire from work, not life. You may have a new set of dreams
for your post-retirement life. At the same time, you may also want to
maintain your day-to-day lifestyle without worrying about
expenses.
By planning in advance, you can define the path to achieve these life goals without any financial dependence.
Here is how retirement planning can help you:
To maintain the standard of living
You want your current lifestyle to continue even after retirement. Today, these expenses are covered by your monthly income. After retirement, you can plan to get a regular income to cover your daily expenses
To be prepared for a longer life
You may need to save a lot more for your post-retirement expenses since the average life expectancy is higher today10. By planning in advance, you can make all the arrangements for a longer post-retirement income
To be emergency-ready
You would not want to depend on anyone in case of any financial emergencies or medical expenses. With the right retirement plan, you can build an emergency fund that will keep you prepared for unexpected events
To fulfil retirement goals
Every retirement is a new lease of life. It’s that beautiful point in life where you have the time to fulfil goals like travelling to new places, picking up a new hobby, or even starting your venture. You may also continue to have commitments to fulfil like sending your child abroad for higher studies. With the right retirement plan, you can secure all these dreams
To fight inflation
In India, the prices of consumer goods grew 6.2% in 2020, as per CPI inflation data12. This can affect your standard of living. After all, what you could buy today for say, ₹ 1,000/-, will probably cost a lot more tomorrow. By planning for retirement, you can invest in advance and grow your money to beat inflation
To leave a legacy
You have worked hard to build a life of comfort for your family. You want to ensure this comfort lasts for years to come, even in your absence. When you plan for your retirement and build your retirement savings, you can plan to leave wealth behind for your family too
To maintain the standard of living
You want your current lifestyle to continue even after retirement. Today, these expenses are covered by your monthly income. After retirement, you can plan for a regular income to cover your daily expenses
To be prepared for a longer life
You may need to save a lot more for your post-retirement expenses since the average life expectancy is higher today10. By planning in advance, you can make all the arrangements for a longer post-retirement income
To be emergency-ready
You would not want to depend on anyone in case of any financial emergencies or medical expenses. With the right retirement plan, you can build an emergency fund that will keep you prepared for unexpected events
To fulfil retirement goals
Every retirement is a new lease of life. It’s that beautiful point in life where you have the time to fulfil goals like travelling to new places, picking up a new hobby, or even starting your venture. You may also continue to have commitments to fulfil like sending your child abroad for higher studies. With the right retirement plan, you can secure all these dreams
To fight inflation
In India, the prices of consumer goods grew 6.2% in 2020, as per CPI inflation data12. This can affect your standard of living. After all, what you could buy today for say, ₹ 1,000/-, will probably cost a lot more tomorrow. By planning for retirement, you can invest in advance and grow your money to beat inflation
To leave a legacy
You have worked hard to build a life of comfort for your family. You want to ensure this comfort lasts for years to come, even in your absence. When you plan for your retirement and build your retirement savings, you can plan to leave wealth behind for your family too
How Much Do You Need to Retire?
The amount you need to retire will depend on your post-retirement goals. You may have goals such as starting a venture, pursuing your hobbies, travelling and so on. You may also want to maintain your current lifestyle post retirement. The amount you would need must account for all your retirement needs. You must consider factors such as any income sources as well as inflation. These factors help you determine a suitable figure for your retirement needs.
Advantages of retirement plans
Below are the advantages of a retirement plan:
Returns for life
Retirement plans such as annuity plans provide you returns for life. You may choose to invest regularly or as a lump sum and stay financially independent for your entire life.
Regular income after retirement
A retirement plan helps you create a regular flow of income after retirement. Retirement plans offer a fixed income which substitutes for your pre-retirement salary. You can use this money to cover your daily expenses, such as groceries, fuel, electricity, and more. You can also meet your post-retirement goals, such as traveling, pursuing a hobby, starting a new venture, and more.
Tax2 benefits
A retirement plan provides you with tax2 benefits. You can claim a deduction of up to ₹ 1.5 lakh for the premiums paid towards the plan under Section 80C2 of the Income Tax Act, 1961. So, you can save for your future needs as well as lower your taxes.
Importance of a retirement plan
Stay financially prepared for medical emergencies
As you grow old, you may need healthcare facilities. A retirement plan can help you cover these expenses without affecting your savings.
Stay financially independent
A retirement plan can help you continue your current lifestyle even after retirement. The income from the plan can help you meet your day-to-day expenses and meet your financial goals post retirement.
Help your family as well
Retirement plans not only help you but also those around you. Income from the plan can enable you to help your loved ones, including child and your spouse, whenever they are in need of money.
Meet your financial goals
Apart from life’s necessities, retirement plans can also help you fulfil your goals post retirement. You may have retirement goals, such as traveling, pursuing a hobby, starting a new venture, and more. Retirement plans can help you fulfil these goals without any worry.
A step-by-step guide to planning your retirement
We have created a step-by-step guide that can help you plan your retirement.
Step 1: Set your retirement date
The first step of retirement planning is to answer the question: At what age would you like to retire?
You may want to retire at the age of 60, or you may want to plan for an early retirement. The time you have until retirement can affect a lot of your decisions.
For example, if you are 15 years away from retirement, you can choose to invest smaller amounts every month. You can also afford to take a more aggressive approach towards investing. In contrast, if you are 1-2 years away from retirement, you may need to invest a large amount in safer options.
You may also want to consider factors like pending loans, current savings, ability to take workload or stress, among others.
Step 2: Decide what you would like to do after retirement
You may want to live a simple life, or you may have large dreams like starting a new venture or taking up new hobbies. Your post-retirement lifestyle can dictate how much you may spend on a daily or monthly basis.
Here are some questions you can answer to find out your ideal retirement:
· Would you like to relax and spend time with family?
· Would you like to start a new business?
· Do you have any specific goals to fulfil after retirement?
· Does volunteering and helping your community excite you?
· Do you have responsibilities like your children’s education or marriage to fulfil?
These are just some of the factors you can consider to understand your ideal retirement lifestyle.
Step 3: Find out what expenses would continue after retirement
Your monthly expenses today may or may not continue post-retirement. For example, you may be paying for your child’s education currently. But if they are likely to graduate before you retire, those expenses may not continue.
You may also have lifestyle-related expenses - some of which may continue even after retirement. For example, utility bills like electricity and the internet are likely to continue.
This is why you may want to go through your current expenses and identify which ones are likely to continue post-retirement.
Step 4: Estimate the cost of your retirement goals
You may want to buy a vacation home to enjoy your post-retirement years. You may also want to take your spouse on a cruise or explore a new country every year. You need to estimate the cost of these goals that you plan to fulfil during retirement.
Step 5: Plan for an emergency fund
There can be unexpected circumstances like medical emergencies or accidents. Such situations can create a financial strain after retirement. By building your retirement savings, you can build a cushion that can minimise the impact of such unfortunate events.
Step 6: Tally the amount and add inflation
By now, you may have a clear picture of your retirement lifestyle and goals. The next step involves listing these down and assigning an amount for each goal or expense. For example, you can make a list like below:
| Expense | Cost |
| Living expenses | ₹ 50,000 per month |
| Travel | ₹ 5 lakh per year |
| Child’s education abroad | ₹ 2 crore |
| Emergency fund | ₹ 50 lakh |
Note: These numbers are just indicative in nature.
In the above example, traveling once every year for 10 years will need a budget of ₹ 50 lakh. Similarly, for 20 years after retirement, the living expenses could cost another ₹ 1.2 crore. Add to this, child’s education of ₹ 2 crore and an emergency fund of ₹ 50 lakh.
When you add up all these expenses, it amounts to an estimate of ₹ 4.2 crore.
You will also need to factor in the impact of inflation on this amount.
Step 7: Calculate how much you have saved already
You may have saved regularly over the years. Your workplace may have also contributed regularly to an Employee Pension Fund. You should take stock of all your investments to date.
Next, estimate how much these investments may grow until your retirement. This can give you a good idea about how much you may need to invest further.
For example, let’s assume you are 45 years old and you have already saved ₹ 60 lakh over the years. You may expect to earn 8% returns per annum over the next 15 years. You can then expect your investments to be valued at ₹ 1.9 crore at the time of your retirement.
Step 8: Decide your monthly investment amount
You may want to invest a certain amount every month towards your retirement savings. The amount of money you invest can have a big impact. For example, if you can invest ₹ 50,000/- every month without fail for 10 years, you can set aside ₹ 60 lakh. This money can grow over the years and add a lot more value to your retirement savings.
Once you decide how much you plan to invest, you can find out the estimated value of your retirement savings. You can compare this amount with your estimated cost of retirement. This can help you identify any gaps and make necessary changes to your plan.
Step 9: Choose your investment option
Every investment option has a different way of earning returns. Some options, like equity, have a higher potential of earning returns, but they come at the cost of higher risks. Other options, like debt or fixed-income investments, offer a safer approach but may earn lower returns.
You can also choose a mix of equity and debt to grow your money.
Step 10: Choose if you want regular income or lump sum payout
The last step of retirement planning is about deciding your income after retirement.
You may plan your investments such that they mature on the day you retire and give you a lump sum amount. You can also plan in such a way that when you retire, your investments give you a lifelong regular income.
You can also invest your lump sum in an annuity plan and get lifelong regular income every month, quarter, six months or year.
Where to invest for retirement?
Many investment options can help you save for retirement. Some options
may attract higher risks; others may help you protect your wealth.
We understand that growing your money safely is important. This is why we have designed retirement plans that suit your needs. Some of these plans offer you the potential to grow your money. There are also plans designed to ensure a guaranteed1
regular income for life.
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Benefits of retirement plans5
Regular income after retirement
Guaranteed1 lifelong income
Safe and secure investment without market volatility
Customisable as per your needs
Tax2 benefits on investments
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Types of retirement plans
Depending on your requirements, you can select from these two types of retirement plans:
Retirement Savings plans
Retirement Annuity plans
These plans help you grow your money over the years
before retirement. With these plans, you can invest regularly over a period of time and build your retirement fund. Two plans that you can consider are ICICI Pru Lakshya Lifelong Income3 and the ICICI Pru Signature4 – systematic withdrawal plan option. These plans also provide a life cover11 to protect your loved ones.
Typically, you select such plans when you want to grow your
money in a safe manner and are planning for retirement well in
advance.
These plans help you get regular, guaranteed1 income throughout your life. You have the power to decide when you want to start getting your regular income. You can also choose whether you want your regular income every month, quarter, six months or year. An example of a retirement annuity plan is ICICI Pru Guaranteed Pension Plan.
Typically, you select annuity plans to secure your retirement with regular, guaranteed1 income all your life.
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Retirement Planning Stages
Your approach for retirement financial planning may differ at different stages of your life. Below is a breakdown of how you can plan your retirement through various life stages:
Young Adult (Ages 21–35)
This is the time to establish a solid financial foundation. Starting your retirement planning early allows you to save more and earn higher returns. Your must focus on selecting suitable financial instruments that can help you get the benefit of compounding over time.
Early Midlife (Ages 36–50)
During this life stage, your responsibilities towards your family may increase. However, it is also important to balance your current financial goals and your retirement needs. You may want to adjust your investment approach based on your evolving needs.
Later Midlife (Ages 50–65)
As you approach retirement, it becomes essential to assess your financial readiness. You may want to fine-tune your investment portfolio to ensure that your retirement funds are adequate for your investment. It is also important to explore healthcare plans, as your medical expenses will likely increase as you age.
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How retirement plans work
Before choosing a plan, you must, first, identify your needs and goals. If you have some years until retirement and want to build a corpus, you can go for a retirement savings plan. If you are nearing retirement and have some funds you invest in, you can choose a retirement annuity plan.
If you invest in a retirement savings plan, you get a lump sum amount as your retirement fund on maturity. You can invest the entire lump sum amount or a part of it in an annuity plan to get lifelong regular income.
When you invest in retirement annuity plans, you will start getting regular income every month, quarter, six months or year starting either immediately or at a later period as per your need.
Depending on the Retirement plan you choose, you have the power to control5:
- How you want to grow your retirement fund
- If you want lump sum or regular payouts
- When your regular income starts
- Whether you get your regular income every month, quarter, six months or
year
Tips for retirement planning
Below are some tips for your retirement planning:
Save for retirement now
Instead of delaying matters for a later stage in life, consider planning for retirement immediately. Saving early gives more time for your money to grow, hence, providing a greater income during your retirement. Investing in a retirement plan during your earning years can also help you save tax2.
Be prepared for future financial emergencies
It is important to have an emergency fund to rely on. This can help you in your hour of need and cover the costs of unplanned expenses. So, when investing your money, make sure that you save adequately for any unexpected financial requirements.
Explore various life insurance options
Life insurance can safeguard your loved ones with a protective financial security in your absence. Therefore, add some life insurance options to your list when exploring and comparing investment plans.
Diversify your investments
When preparing for the future, try to choose different types of investment options that put your money in varying asset classes, industries, and sectors. This way, if you suffer a loss in one investment or if one option does not perform per your expectations, you can rely on the others.
Think about your retirement wants
Keep your retirement wants in mind when choosing an investment option. For instance, if you wish to settle in a new city, your monthly expenses could be higher, depending on the city. Likewise, if you like to travel, you may spend more on travel expenses in retirement than someone who prefers being at home. Your wants can help you choose a suitable plan that can generate sufficient returns.
Factors to keep in mind while
planning for retirement
Start as early as possible
When it comes to retirement planning, time is your best asset. The more time you have, the better you can grow your money, and the more goals you can fulfil
Invest first, spend later
Schedule your investments a day or two after you get your monthly income. This way, you can maintain your investing discipline and control your expenses
Pay off costly debts first
While working on your retirement plan, you can direct your savings towards paying off any debt first, especially if the interest rate is high. This can help secure your retirement from liabilities
Set automatic transfers
You can make it easy to invest by setting up automatic bank transfers. This can help you avoid any delays or misses in investing each month
Set up annuities
To secure your post-retirement income, you can rely on annuity plans for guaranteed1 lifelong income
Check for tax efficiency
When you choose an investment option, you may want to check on how the returns will be taxed.
Monitor regularly
You should check your investments at least once a year. This can help you adapt your plan better and make quick decisions if your returns are not as expected
Change investments closer to retirement
As you inch closer to retirement, you may want to move your investments to low-risk options. For example, you can use the Switch Funds option to reduce your equity exposure
Keep paperwork ready and involve family
You may want to keep your family aware of all the important paperwork and financial details. This comes especially handy during emergencies and unfortunate events
Choose the right partner
When it comes to money matters, it’s important to work with trusted brands. This can ensure your money is safe in their hands
Start as early as possible
When it comes to retirement planning, time is your best asset. The more time you have, the better you can grow your money, and the more goals you can fulfil
Invest first, spend later
Schedule your investments a day or two after you get your monthly income. This way, you can maintain your investing discipline and control your expenses
Pay off costly debts first
While working on your retirement plan, you can direct your savings towards paying off any debt first, especially if the interest rate is high. This can help secure your retirement from liabilities
Set automatic transfers
You can make it easy to invest by setting up automatic bank transfers. This can help you avoid any delays or misses in investing each month
Set up annuities
To secure your post-retirement income, you can rely on annuity plans for guaranteed lifelong1 income
Check for tax efficiency
When you choose an investment option, you may want to check on how the returns will be taxed.
Monitor regularly
You should check your investments at least once a year. This can help you adapt your plan better and make quick decisions if your returns are not as expected
Change investments closer to retirement
As you inch closer to retirement, you may want to move your investments to low-risk options. For example, you can use the Switch Funds option to reduce your equity exposure
Keep paperwork ready and involve family
You may want to keep your family aware of all the important paperwork and financial details. This comes especially handy during emergencies and unfortunate events
Choose the right partner
When it comes to money matters, it’s important to work with trusted brands. This can ensure your money is safe in their hands
Trusted brand. The reason we exist
Trust is our foundation and our cornerstone. Over the last two decades, millions of people have trusted us for the financial security of their loved ones.
- One of the top life insurers6 in India, thanks to our customers
- Voted as one of the most valuable brands in India 7 times in a row by over 32 lakh customers7
- ICICI Pru Guaranteed Pension Plan has been voted as the ‘Product of the Year’ under the Retirement and Pension Plans category8 in 2021
- Received FICCI Award for excellence in claims and service in 2020, a validation of our commitment towards serving our customers9
Eligibility for Retirement Plans in India
Here are the eligibility criteria for purchasing a retirement plan in India:
Entry age
In most cases, the minimum age for entry into a retirement plan is capped at 18 years, while the maximum age is around 70 years. However, these can differ depending on the plan you choose.
Premium
Retirement plans generally allow you to choose the premiums you want to pay towards your plan, as per your requirements. A higher premium may lead to a higher income during your retirement.
Vesting age
The vesting age is the age at which you can start receiving your pension or income from the plan. The general vesting age is fixed at 40. However, this may vary depending on the plan you choose.
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Know more about retirement planning by ICICI Prudentiall Life Insurance
1. Why do you need retirement planning?
You may have several dreams for your post-retirement life. With a little retirement planning in advance, you can fulfil your post-retirement goals while maintaining the same lifestyle.
With rising inflation, the cost of all products and services is increasing. With a sound retirement plan, you can ensure that your retirement funds are protected against inflation as well. It can also help you be ready for any unforeseen financial emergencies.
2. Why choose a retirement plan?
A retirement plan is designed to take care of your post-retirement days and help you lead a stress-free life. One such type is a retirement savings plan, which helps to grow your money and provide a regular income for life. Such plans help you set aside some amount towards your retirement while you are still working. The other type is a retirement annuity plan where you invest a one-time amount and receive a guaranteed1 regular income either immediately or at a later period from the purchase date.
3. What is the ideal income I need during retirement?
Every retirement is unique. This is why, the money you need for your retirement depends on various factors like:
- Your retirement age
- Your health and lifestyle
- Any loans or liabilities
- The retirement goals you may have
- Any commitments you may have to fulfil
We can help you find out the amount you would require in a matter of seconds with our pension calculator. Just answer a few basic questions on your income, age, the number of years till you want to retire, and the premium amount you want to invest.
You can use our pension calculator to understand the ideal income you would require as per your needs.
4. What are some effective ways to plan for retirement and achieve my financial goals?
You may consider the below steps to plan for your retirement and achieve your financial goals:
- Set a target retirement age
- Identify your retirement goals
- Calculate the amount you will need to meet these goals. Factor inflation into the calculation
- Save/invest in the right retirement plan that can help you stay financially prepared to meet your post-retirement goals
5. When should I start planning for retirement and how much do I need to save to prepare?
You should start planning for your retirement as early as possible. Investing early offers more time for your money to grow and give higher returns. This helps you stay financially prepared for your post-retirement needs.
The amount you need to save for retirement depends on your post-retirement goals. You may want to travel, buy a house, start a new venture and more. You would also want to continue your current lifestyle after retirement and meet medical expenses. Basis these, you can calculate the amount you will need during your retirement. Do not forget to factor inflation into this calculation. Once you have calculated the amount you will need for your retirement, you will be able to calculate the amount you need to save now to stay financially independent during retirement.
6. How can I make sure my retirement savings will last throughout my lifetime, even if I live longer than expected?
You may consider buying a retirement annuity plan that provides you with a fixed income for life. Plans like ICICI Pru Guaranteed Pension Plan Flexi provide you with guaranteed14 income that is fixed at the time of the purchase of the plan. This income is paid to you throughout your life
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7. What steps can I take to adjust my retirement plan if my circumstances change, such as needing to retire earlier or later than expected?
It is important to regularly review and update your retirement plan to cater to your changing requirements. You may plan to retire earlier or later than what you planned earlier. Your post-retirement goals may also change. Reviewing your retirement plan regularly can enable you to adjust it to meet your needs.
8. What is deferment?
When you buy an annuity plan, you can choose to get your regular income from the very next month onwards. These plans are called immediate annuity plans.
However, you can also choose to start getting your regular income at a later date, provided it is within the time frame specified in the terms and conditions of the plan you choose. This is called ‘deferment’. For example, in the Deferred Annuity options of ICICI Pru Guaranteed Pension Plan, you can choose to get your regular income at any time between 1 and 10 years from the date of purchase.
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Disclaimers:
1. Annuity will be payable in arrears. The frequency of annuity payments can be monthly, half-yearly, quarterly or annually as chosen by the annuitant at the time of purchasing the annuity. The annuity amount chosen at policy inception is guaranteed for life
2. Tax benefits under the policy are subject to sections 80C, 80CCC, 80CCD, 115BAC & other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on the above
3. This advertisement is designed for ICICI Pru Lakshya Lifelong income which is offered under ICICI Pru Lakshya. The customer has the choice of purchasing other options under ICICI Pru Lakshya as per his/her needs and there is no compulsion to purchase this option as suggested by the Insurer and as presented in this advertisement. For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.
4. Unit Linked products are different from traditional insurance products and are subject to the risk factors
The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/ her decisions. ICICI Prudential Life Insurance is only the name of the Life Insurance Company and ICICI Pru Signature is only the name of the unit linked insurance product and does not in any way indicate the quality of the product, its future prospects and returns
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the Insurance company
The various funds offered under this product are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns
You get the option to get regular money from your fund value with Systematic Withdrawal Plan. Systematic Withdrawal Plan is allowed only after the first five policy years
5. The benefits mentioned might not be available with all products. Please refer to the product brochures for details
6. Source:
7. As per BrandZ, top 75 most valuable Indian brands 2020, 2019, 2018 and BrandZ top 50 most valuable Indian brands 2017, 2016, 2015, 2014. Study by KANTAR Milward Brown and published by WPP
8. ICICI Pru Guaranteed Pension Plan - 2021: Winner Life Insurance - Retirement & Pension Plans Category. Survey of 2250 people by NielsenIQ across categories
9. FICCI Insurance Industry awards 2020
10. Source: State, area and gender key to life expectancy, shows data
11. Life cover is the benefit payable on death of the life assured
12. Explained: Why inflation risk is growing in India
14. A guaranteed lump sum or regular income will be payable based on the plan option selected
ICICI Pru Guaranteed Pension I13 & I14 UIN: , ICICI Pru Lakshya Lifelong Income: UIN: , ICICI Pru Signature: UIN:
ICICI Pru Guaranteed Pension Plan Flexi - 105N187V04
W/II/3741/2021-22
