In recent years, earning individuals have been putting a lot of stress on the need for investment. This is mainly because they want to enjoy a financially safe future. However, not everyone has the same investment plan. Some might choose to invest in market-linked securities, while others might choose deposits and other available schemes. However, when it comes to retirement planning, you should focus more on plans that help you have a hassle-free retirement. Endowment plans are one such option that you can consider when planning your retirement. What are they? And how do they benefit your retirement? Read more to find out.

What is retirement planning?

Retirement planning essentially means charting out a financial plan for your retirement. It mainly involves the financial aspect of your post-retirement life. Once you retire, you do not have a continuous source of income unlike when working. In such situations, one might rely wholly on their savings. While it may seem like a smart choice, but it isn’t.

Rising inflation can impact your savings and might cause financial problem during emergencies. This is where planning your retirement comes into the picture. Investing in different financial instruments helps you gain good returns on your investments. These returns become a part of your extra income that can help you manage expenses once you retire. It also keeps your savings intact without the risk of depletion. 

What is an endowment plan?

An endowment plan is a type of life insurance policy. This policy financially protects the insured and their beneficiaries from different life risks. At the same time, you have the option of investment which helps in increasing your wealth. While this may seem similar to ULIPs, endowment plans offer guaranteed returns. On the other hand, the returns in ULIPs are dependent on where you invested your money and what the value of those units is at maturity. 

In an endowment plan, you also get a bonus on its maturity. In case, the policyholder was to pass during the term of the policy, the beneficiaries get the entire amount of sum assured along with death benefits. Hence, this money can help your loved ones manage cost of living and manage other expenses in your absence. 

Why choose an endowment plan?

Listed below are the reasons how this plan can benefit your retirement:

• Flexible premiums

Most people look for easier premium options in life insurance policies. In endowment plans, you have the flexibility when it comes to the option of premium payment. You can pay your premiums on a monthly, half-yearly or yearly basis. You also have the option of making a lumpsum premium payment. What these options allow is for you to plan your expenses accordingly, without having to cut down on them just to make premium payments. 

• Plan benefits

As mentioned earlier, you get the benefit of investment and insurance in an endowment plan. The investment component helps to increase your wealth in terms of future planning while the insurance cover provides you with financial assistance during life risks. Once the plan matures and you survive the term, you get the full maturity benefits along with a bonus. This money can help to stay financially afloat for a long time.

However, in the event of an unfortunate demise during the policy term, your beneficiaries would receive death benefits along with the sum assured. This would allow them to financially independent without the risk of instability in your absence.

• Tax benefits

Premiums paid for this plan are tax-exempted under Section 80C of the Income Tax Act. If your premium is under Rs.1.5 lakhs, you can enjoy this benefit. Similarly, the maturity and death benefits received from this plan are also tax-exempted under certain conditions of Section 10(10D) of the Income Tax Act. 

These are just a handful of reasons to include endowment plans in your retirement planning. You can get in touch with your insurance advisor to know more about the different plans, their pricing, and benefits.