Every individual is accustomed to living in a certain way. The more an individual earns, the better quality of life they live and give their family. With a regular stream of income, it is easy to have a financial balance of savings and spending. Along with a good standard of lifestyle, it is also essential to safeguard your future, especially for the time when you will stop working and move on to your golden years, your retirement.
Retirement is a pleasant phase of life if planned effectively and well in advance. After working for decades, it feels good to sit on the back burner and enjoy a comfortable life. To ensure that you live the retirement you always wanted, you must plan years ahead. It is important to remember that when you retire, your paycheck stops but your expenses continue to exist. Hence, it is essential to have a financial plan to build your retirement corpus.
With an effective retirement plan, you can easily live the retirement life you always wanted. Several financial products can be a part of your retirement. One such product that is a must-have in your retirement plan is a Unit Linked Insurance Plan (ULIP). The meaning of ULIP in simple terms is a plan that offers life insurance and also investment opportunities. If you are wondering how a ULIP would help in building your retirement corpus, read further to get your answer,
How to build a retirement corpus with a ULIP?
ULIP is a unique financial product since it caters to two key parts of financial planning, life insurance and investment, in a single plan. Below are the main features that help ULIP in building a retirement corpus:
- Long-term wealth creation
The advantage of a ULIP is that when you stay in it for the long haul, you get the benefits of compounding. This means that you get returns on your investments and also on your previous returns. Over the years, this can lead to the creation of a sufficient corpus for your retirement. You must plan your ULIP investment, keeping in mind the end fund value you want when your ULIP matures. Use tools like a ULIP return calculator to get an estimate of the returns your desired funds are likely to provide. The early you invest in a ULIP, the more you will get the benefits of compounding over the years. This long-term creation of wealth allows you to collect a sufficient pool for your retirement.
- Offers flexibility in investments
ULIP plan offers life insurance and investment options. The investment part of ULIP proves quite advantageous since it allows you to switch between different fund options anytime you want. For example, if you invest in equity funds, you can switch to debt funds if you want a safer option or vice versa. Since you are planning for your retirement, in the initial years of your ULIP, you can invest in equity funds. At the end, when your plan is about to mature, you can switch your investments to debt funds to avoid any risks.
- Potential for providing high returns
Traditional investments offer nominal returns which fail to even make up for the rising inflation. Instead, if you stay invested in a ULIP for the long haul, you have the potential to earn great returns on your money. Equity funds usually offer the highest returns. With different fund options and the compounding of your investment, you can multiply your investments. Use a ULIP return calculator before investing in funds to know about the approximate returns that they offer.
- Tax exemptions
The meaning of a ULIP is much more than an investment plan. It also provides life insurance. The premiums that you pay for your ULIP are subjected to tax deductions according to Section 80C of the Income Tax Act. Also, in case of your unfortunate demise during the policy, your nominee will receive the sum assured or fund value, whichever is higher. The amount that the nominee receives is exempt from taxes as per Section 10 (10D) of the Income Tax Act.
Retirement is an enjoyable phase of your life. To ensure that you live the retirement life that you wanted, start investing in plans like ULIP as early as possible. The benefit of investing is that you can create a sufficient retirement corpus with ease.