Life
General
Claims
Resources
Simplifying Life Insurance in India
9 Retirement Planning Myths Everyone Should Know
The concept of retirement works differently for different people, as does their retirement planning. However, everyone must plan this period ahead of time to avoid crisis and financial dependency post-work life.
Speaking of which, several retirement planning myths revolve around the concept. This article will shed light on the most commonly believed retirement myths to dismiss them so that you reach your future goals conveniently and enjoy this phase of life instead of only enduring it.
Debunking Top 9 Myths about Retirement Planning
Myth #1: Retirement Planning Can Wait Until You Are Older
This is a common misconception that people tend to believe. However, the truth is starting early is the key to successful retirement planning. The earlier you start, the more time you will have to build wealth through savings, investments and compound interest.Myth #2: Only People With High Income Can Afford to Save For Retirement
Another common myth is that people believe only high-income individuals can save enough money. However, retirement planning is essential for everyone, irrespective of income level. Therefore, if your monthly income is low, you can make a smaller contribution towards retirement savings that can accumulate significantly over the years.Myth #3: My children Will take care of You During Retirement
While it is natural to expect some support from your children in the future, you must also have a retirement plan independently. Financial dependency can result in uncertainty. Therefore, you do not want to burden your children with financial responsibilities, and there is no assurance that they can provide support even if they wish to.Myth #4: Real estate Is the Best Investment For Retirement Planning
Real estate can be a profitable and popular investment option, but it cannot serve as an efficient wealth-building tool. Therefore, solely depending on real estate would not be a wise choice. Instead, a diversified portfolio, which includes investments in stocks, bonds, and mutual funds, can provide higher returns in the long run while minimising the investment risk.Myth #5: I Can Use My Retirement Fund Now and Save Later
It is a common misconception to think that you will have enough opportunity or time to save enough for retirement after exhausting your retirement fund. Moreover, with the changing job market and economic conditions, pension plans alone may not provide enough for retirement.
Even if you have financial responsibilities such as funding a child's education or marriage, seeking a loan will be safer than withdrawing a chunk from your retirement.
Myth #6: It Is Too Late to Start Retirement Planning in the40s
If you haven't been saving for retirement until now, you may think it is too late to start saving now. But as they say, it is better late than never. So, while starting early is wise, starting your retirement planning is never too late.
You can look for a pension plan with high equity investments and returns. You can also get a life insurance plan that will offer both protection and a stable income post-retirement.
Myth #7: I Will Spend Less Money During Retirement.
Retirement may result in a reduction in certain expenditures, such as those connected to employment. However, as the cost of living increases yearly, failure to improve your income Therefore, it is important to consider these costs while making plans to maintain financial security in the old life.Myth #8: My Inheritance Will Sufficiently Cover the Expenses
Your inheritance may or may not be sufficient depending on the kind and amount of the asset. Therefore, relying solely on an inheritance to cover retirement expenses is a common misconception and mistake.
Moreover, unexpected taxes and fees sometimes apply to inheritances, which can drastically diminish the amount of money received. It is important to develop a thorough retirement plan incorporating various income streams and accounting for unforeseen costs to maintain financial security in retirement.
Myth #9: Market Investments Are Too Risky
You may believe that you cannot risk your savings in market investments for retirement as they pose risks. However, many plans, such as ULIPs, can offer a solution by letting you select funds according to your risk appetite and goals. So, by investing in a combination of high, medium, and low-risk funds, individuals can earn returns while minimising risk.FAQs About Retirement Planning Myths
What are the three most common mistakes in retirement planning?
What do the "3 R's" of retirement stand for?
Is retirement planning just investing?
Medical emergencies are covered by health insurance. Why would I need term insurance in retirement?
Important Articles about Retirement Planning
Other Important Articles Related to Retirement & Pension Plans
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
Latest News
04-03-2025
Life Insurance Agents Surge: 3 Million in 2025
Volkswagen India will launch the Golf GTI and Tiguan R-Line by the end of Q2 2025. The Tiguan R-Line, unveiled in 2023, features aggressive styling, larger 19-inch alloy wheels, and LED light bars. Inside, it boasts a 12.9-inch touchscreen, 10.3-inch digital instrument console, and ambient lighting. Powered by a 2.0-litre turbo-petrol engine with 261bhp and 400Nm, it offers six-speed manual and seven-speed DCT automatic transmissions.
19-02-2025
Life Insurance: FDI Boosts Growth Potential | 2025 Update
The Indian life insurance sector is set to grow significantly with the government's decision to raise the Foreign Direct Investment (FDI) limit to 100%. This move will provide the necessary capital for industry expansion, allowing insurers to increase mortality coverage and market penetration. Private insurers have already seen a notable rise in retail sum assured, outpacing new business premiums. The shift to unit-linked investment plans (ULIPs) may pressure margins, but increased capital inflows will help meet the growing demand for coverage.
12-02-2025
Budget 2025 Brings Changes to ULIP Taxation
The Union Budget 2025 has redefined the taxation landscape for Unit Linked Insurance Policies (ULIPs). Starting April 1, 2026, ULIPs with annual premiums exceeding ₹2.5 lakh will be classified as capital assets, subjecting their gains to capital gains tax rather than treating them as income from other sources. This amendment aims to align ULIP taxation with other equity-oriented investments, ensuring a uniform tax treatment across financial products. Policyholders are advised to reassess their investment strategies in light of these changes to optimize their tax liabilities.
02-02-2025
New Tax Rules for Life Insurance Premium
Starting April 1, new income tax rules will impact ULIPs and other life insurance policies with premims over 5 lakh will no longer enjoy tax-free maturity benefits under Section 10(10D). This move aims to align insurance with genuine risk coverage rather than high ticket investments. Smart investors might now explore alternate tax-saving strategies!
12-12-2024
Policyholders Now Get Increased Surrender Value
The new business premium of life insurers was Rs 377,960 crore in the fiscal year ending March 2024. Starting October 1, policyholders will receive higher refunds if they discontinue their policies, as per new IRDAI regulations. This change may lead to increased premiums, impacting insurers' margins. Policies must comply with the new surrender value norms by September 30. Despite initial opposition, the changes aim to improve customer benefits and are expected to positively impact the insurance industry over time.
10-12-2024
Premium Costs for Life Insurance Decrease in November
In November 2024, new business premiums (NBP) of life insurance companies fell by 4.5% year on year (YoY) to Rs 25,306.56 crore, mainly due to a 27.17% drop in LIC's premiums. However, private insurers saw a 30.84% YoY growth in NBP to Rs 13,555.45 crore. Revised surrender value norms, effective October 1, led to enhanced special surrender values for policyholders. Despite the overall decline, private sector growth improved, cushioning the fall. The life insurance industry saw a 15.7% YoY growth in NBP during April–November 2024.
18-11-2024
Govt's FDI Plan: New Insurance Rules
The government plans to allow 100% foreign ownership of insurance businesses, attracting international companies. This proposed legislation also lets individual insurance agents offer policies from multiple companies. The changes are part of the Insurance Amendment Bill, set for introduction in the winter session of Parliament. These measures aim to increase insurance penetration, currently at 4%, by allowing more companies to underwrite policies and enabling agents to sell various covers.
08-11-2024
Record Growth: Life Insurers Boost Premiums 18.56%
The Life Insurance Council reported a 13.16% year-over-year growth in October 2024 New Business Premiums (NBPs), reaching ₹30347.6 Crs, up from ₹26819.01 Crs in October 2023. Year-to-date (YTD) collections also increased by 18.56%, from ₹185195.81 Crs to ₹219561.64 Crs. This growth is attributed to life insurers' focus on first-time buyers. Despite this, new policy issuances dropped by 41.6%. Individual single premiums grew by 8.60%, with overall YTD growth at 14.16%.
01-10-2024
Higher Refunds for Life Insurance Policyholders from October 1, 2024
Starting October 1, 2024, policyholders who surrender their traditional endowment life insurance policies will receive higher refunds due to new rules from India's Insurance Regulatory and Development Authority (Irdai). The exceptional surrender value (SSV) will be increased, providing more flexibility and liquidity. This change benefits those exiting policies early, offering refunds even after the first year. Insurers must now include detailed surrender values in policy illustrations, enhancing transparency for policyholders.
23-07-2024
TDS on Life Insurance Payouts Reduced
Starting October 1, 2024, the tax deducted at source (TDS) on life insurance payouts will be reduced from 5% to 2%. This change, part of the Budget 2024 proposals announced on July 23, aims to increase liquidity for policyholders. The reduction applies to payouts under section 194DA, which covers sums paid under life insurance policies, including bonuses, except for amounts exempt under section 10(10D). Life insurance companies have welcomed this move, anticipating it will benefit customers.
Read More
Renew & Download Policy Document, Check Challan, Credit Score, PUC & more
Anytime, Anywhere. Only on Digit App!
Rated App
Rated App
Scan to Download
