A picture-perfect retired life is where you spend joyful days with your loved ones without a single worry. Sadly, that is not how life always works. After retirement, you do not have a regular source of income, but the family expenses do not just magically stop. Hence, whether you are planning to retire at the age of 60 or earlier, it is important to create wealth during your years of service, to secure the post-retirement life. A Unit-Linked Insurance Plan (ULIP) can help you in this endeavor.
What are ULIPs?
The Unit-Linked Insurance Plan meaning is a combination of life insurance policy and investments. When a policyholder pays the regular premiums for the ULIP, the insurer uses a portion of it for the life insurance cover. The balance amount is utilized for different debt and equity investments. With time, these investments accumulate enough wealth to financially support your post-retirement life.
Now that you understand ULIPs, read on to learn how to utilize the policy to meet your financial goals.
Compounding your money with ULIPs
You can begin investing in a ULIP when you are 18, which allows you to start early. If you buy the ULIP right after getting your first job, it is possible to create a considerable wealth by the time you decide to retire. In this investment avenue, you can determine the policy’s tenure and exit at any time after the lock-in period. Hence, a ULIP allows you the flexibility to decide when to retire and start enjoying life.
Whether you want ULIP returns in 10 years or 20 years depends mainly on your post-retirement financial goals. The longer you let your money grow, the more generous your profits will be. Here is an example that can help you understand the policy better.
Rajat is currently 30, and he wants to retire at the age of 60, with enough money to travel with his wife. He understands that there will also be other costs like medical bills and monthly household expenses. Rajat concludes that a corpus of INR 5 crore should be enough to enjoy post-retirement life comfortably.
Considering he has 30-years to create the fund, Rajat can opt for an appropriate ULIP plan with a monthly premium of about INR 15,000. Upon retirement, he can decide to get the returns either as lump-sum or regular payouts, depending on his needs.
Benefits of ULIP that support retirement planning
Your ULIP returns in 10 years or any period of your preference depend largely on instruments where the money is invested and the market situation. However, ULIPs have some useful features, which support your retirement planning. These include:
1. High returns
If you opt for a ULIP that invests in equity funds, the return will be higher than most other investment instruments. Equity investments offer high returns, ensuring you create a large retirement corpus. These funds can maximize your profit, as experienced professionals manage them.
2. Variety of options
If you want to build a retirement fund without taking too much risk, try other investment choices available with ULIP. Apart from equities, ULIPs allow you to allocate your premiums to other funds like debt or balanced, as well. These investment options offer a better risk-reward balance, ensuring a secure retired life.
3. Fund switching
This is one feature of ULIPs that makes wealth creation easier for you. With fund switching, you can decide how your premiums should be divided among different funds. Hence, you can easily shift between equity and debt investment options depending on the market condition.
Now that you understand how a ULIP policy can finance your retired life, it is the right time to find the best funds to invest. When choosing the ULIP, make sure that the estimated returns seem enough to meet your future financial goals.
