10 things to mindfully plan for your retirement phase

Your retirement can be a glorious phase in your career if you plan for it well. We present 10 good investment options for your consideration.

A lack of planning and awareness about the right instruments can be the difference between a stable retirement and an uncertain one. Take a look at the following investment options that will help you plan for your retirement:

1. ULIPs. A Unit Linked Insurance Plan (ULIP) is an excellent insurance instrument to get capital appreciation over investment. It is a long term investment solution that also provides life coverage. You can start investing in a ULIP in your early 30s and keep investing it instead of withdrawing it after a few years, so that you build a large fund of money.
2. PPF. The Public Provident Fund remains one of the most popular investment instruments for Indians today. It provides an interest of 8% on the funds deposited for 15 years, and the minimum deposit is Rs 500 per year. Since it has a lock-in period of seven years, one is compelled to keep depositing in it. After seven years, one may partially withdraw the funds in it for personal use.
3. Annuity plans. This is one of the best instruments to explore for a peaceful retirement. Using the option of Immediate or Deferred Annuity, one may make an investment either one-time or over a period of years respectively. Look for a product with a traditional and non-participative plan that has flexible pay-out options for both you and your loved ones in your absence.
4. Property. Property always appreciates in value, and this feature makes it an attractive investment option. It may be difficult to buy property initially, but there are ways to monetise it almost immediately after purchase, by renting it or reselling at a later date. Property offers good liquidity and many options to make a regular income.
5. Money back insurance policy. This is an insurance product that offers regular income after a certain number of premiums have been paid. The income is provided annually and becomes a valuable second source of revenue in the retirement years. Generally, money back plans offer both survival and maturity benefits.
6. ELSS. An Equity Linked Savings Scheme (ELSS) offers good returns over investment and tax benefits. It is a diversified equity mutual fund that is also known as a tax saving mutual fund.
7. Mutual funds with SIP. A SIP (Systematic Investment Plan) helps you invest in mutual funds in equating instalments, so that you do not need to park a large sum of money in the fund at the outset.
8. Recurring Deposit. This is a way to invest incremental sums of money every month for a certain tenure, so that a large fund may be created at the end of the tenure. On maturity, you get a sizeable corpus with interest payable on the investment.
9. Fixed deposit. A fixed deposit uses a one-time deposit of money for a certain tenure (in months) and gives you returns by paying you interest on the deposit.
10. Life insurance. You can choose a life insurance product that has maturity benefits. The advantages are dual: 1) You get life coverage, and 2) The maturity can be timed to coincide with your retirement, so that you may get a large fund of money for your personal use.

How ULIPs can help you have a happy retirement

Financial experts advise against depending only on private savings and pension plans for a comfortable retirement. It is time to look at ULIPs.

Many people planning their retirement at the current moment have built a large savings fund from their income and/or invested in good pension plans for the future. Both are excellent options and must be pursued by every potential retiree. But the question to ask is: Are these enough?

With living costs rising every day and inflation showing a constant upward trajectory, it is vital to look at investment options that can beat inflation and offer good returns. You may have invested in a bank fixed deposit or must make regular contributions to your PPF account. But when you retire, will the monies from these instruments help you tide over a financial crunch?

It is time to look at Unit Linked Insurance Plans (ULIPs) to create a retirement corpus.

Why invest in ULIPs?

Many would be terrified about investing in equity-linked securities, especially in the context of retirement planning. But the best ULIP plans for retirement are aimed at further lowering the inherent risk while offering excellent returns on investment.

Unit-linked pension plans help you build a large corpus for your retirement. Imagine if you invested a lump sum amount of Rs 50,000 at 14% interest for 30 years. After deducting tax, the returns on the ULIP would amount to about Rs 25 lakh. Processing and other charges are lower on ULIPs than on other equity-linked investments.

Besides, you have the option of switching your ULIP investment to debt markets if you do not wish to invest in equity markets. You can switch back to equity markets if they are performing well. In all, you can switch your fund options up to four times a year. Hence, you are assured of high returns on investment. However, it is better to entrust this task to the fund manager to avoid switching at the 

wrong times in the market cycle.

Even more importantly, the best ULIP plans give you the option of increasing your investment size in the ULIP pension plan. You can do this if you have extra income in the future, or if you have gained returns from another investment that you wish to invest in the ULIP. Hence, you get higher returns by the time you retire.

If you are on the lookout for the best ULIP plan for retirement, we recommend Wealth Max Plan. It is a single premium ULIP that gives the option of future top-ups, plus the freedom to partially withdraw against the ULIP in an emergency. Also, the plan provides tax deductions under Sec 80C and 10(10D) of the Income Tax Act, 1961.

Loan against shares: Which companies are the top performers?

Reputed financial institutions and banks in India have upped the ante on extending loans against securities in India.

As expenses go up every single day and consumers look to create new channels of funding for personal or professional needs, there is a rising trend to seek hitherto unconventional borrowing methods.

This has led to consumers exploring funding through asset backed means. Asset backed loans comprise such instruments as owned gold, shares, equity mutual funds, exchange traded funds (ETFs), bonds, Government securities, etc. Taking loans against securities is fast becoming popular among businesspersons and even private individuals in India. These means are explored when conventional loan methods may not be available or may not be effective. Normally, loans against securities are borrowed for a shorter period of time.

The big guns in the loans against securities universe

Responding to consumers’ growing need to borrow loans against securities, reputed banks and financial institutions in the country have created a range of excellent loan products. While consumers use these loans for their needs, several banks and NBFCs have emerged as key players in this space.

The big players in the loans against securities arena are:

• IDBI Trusteeship
• Aditya Birla Finance Limited
• Axis Bank
• Axis Finance
• IL&FS Trust
• Bajaj Finance
• Citicorp Finance India
• Kotak Mahindra Investments
• Tata Capital Financial Services
• L&T Fincorp

How loan against securities work

You may pledge your securities – shares, gold, bonds, Government securities, et al – the lending institution for a certain tenure. The securities are then valued and the loan amount is issued to about 50% to 70% of the securities’ value. The borrowers’ credit history also plays a factor in the approval of the loan.

In India, the top performers in loans against securities are measured against their cumulative lending per financial quarter. 

10 most popular loan products

Here’s a look at the most popular loans being availed by different segments of the population in India today, to fund both personal and professional pursuits:

1. Home loans. These are the most popular loan products in India. They are loans extended for the purchase of new or resale property. They are secured loans with a lower rate of interest than other products such as personal loans.
2. SME loans. These are loans extended to businesses in the MSME sector so that they can scale up operations and achieve their goals. The loan amount can be used to buy new machinery, bid for a prominent contract or even purchase new property.
3. Loans against property. This is a secured loan, but it differs fundamentally from home loans. In this loan, the owned property is mortgaged to the financing institution for a certain tenure. The loan amount is fixed at about 70% of the property’s value at the time of application. The money can be used to buy new property or make large business payments.
4. Personal loans. These are unsecured loans with a high rate of interest. They are typically extended against the applicant’s credit history and income capacity, for a period generally not extending five years. The money can be used to fund child’s education or wedding, or personal medical procedure, etc.
5. Business loans. These are offered to businesses in both the urban and rural areas at a slightly higher rate of interest than home loans or loans against property.
6. Commercial vehicle loans. Some businesses require their own vehicles for the daily transport of goods and staff. These vehicles may comprise mini-vans, trucks, jeeps, SUVs or even trailers.
7. Two wheeler loans. These are useful for people in the rural areas, who find it easier to navigate bad, narrow roads on two wheelers. Premier financial institutions in India have made the two wheeler loan application process extremely simple.
8. Education loan. Education loans are popular products for those families wishing to send their children to national or foreign universities for higher education.
9. Rural housing loans. People in the rural hinterland are now able to buy their own land or ready houses on the basis of rural housing loans. The loan amount is given up to 70% of ready homes and up to 80% of self-constructed homes.
10. Rural business loans. Small and medium businesses in the rural areas of the country are now able to set up small office spaces, buy factory space and even invest in machinery through rural business loans.

Loan against property: How it helps get a new business off the ground

Entrepreneurs can look at loan against property as the primary seed money for their business. We explain how these loans work.

The first question facing any potential entrepreneur is this: ‘How will I start the business?’ The question is not related to a lack of business ideas; it pertains to a funds crunch. Many businesspersons are hampered by a lack of money – hence, they are unable to get their business idea off the ground. They may either borrow seed capital from friends and family, or take a personal loan.

But there is a better way to get funds quickly and without paying as much interest as one does on a personal loan. We refer to the ‘loan against property’, a solution that can help get one’s business up and running.

How it works

The loan against property is a sum of money that the lending institution grants an applicant who pledges their owned property for a certain amount of time. It is different from a traditional home loan. The loan against property is a secured product, since one pledges the property as collateral. This is how it fundamentally differs from a personal loan, which is an unsecured loan product.

The features of loans against property

• Though slightly more expensive than a home loan (in terms of interest payable), the loan against property is more affordable than a personal loan.
• The factors that normally affect the loan amount are: Whether the property is residential or commercial, location, age, rented/vacant/self occupied, etc.
• The lending institution conducts its own valuation and bases the loan amount on the lowest evaluation. Normally, the loan amount does not exceed 70% of the property value in most cases.
• The tenure for these loans is often smaller than those of home loans, and larger than those of personal loans.
• The property documents remain with the financing institution till such time that the loan is repaid, but it does not exercise ownership over the property.

Repayment capacity is also an important factor in deciding if a loan against property is a good choice or not. A first time entrepreneur with limited prospects and erratic cash flows might find it difficult to repay the loan. For entrepreneurs with good business prospects, however, this is an affordable funding option. If repaid regularly and with partial pre-payment at regular intervals, the funds from the loan against property can literally help take one’s business to the next level.

Where does your monthly salary go?

Are you saving money for your future? If you want to, you must start by opening a savings bank account.

Our lives follow an almost similar trajectory as our parents’ did before us: we get a good education, secure a job, get married and have a family, raise our children and retire in peace. These are the larger goals in life. The smaller goals are about the little things: going abroad for a family vacation, buying an expensive electronics appliance once a while, doing things for our parents.

But whether a goal is large or small, you require money to make it come true. Proper financial planning will help you create sufficient funds for the future. And the first step in this direction is taken by opening a savings bank account.

Why you need a savings account

One of the most helpful habits to inculcate is the savings one. It requires tremendous discipline and focus to save money every month, especially in the face of emergency expenses. But saving money every month holds you in good stead for the future: you can pay for a variety of needs and secure yourself against penury. Saving regularly also reduces the habit of overspending. Also, you need to deposit the saved money in a savings bank account so that you do not end up spending it by mistake and you also earn returns on it (through interest paid by the bank on the residual funds).

Start by budgeting and saving money regularly

Set six monthly targets for yourself, basis the goals you wish to accomplish. For example, if you want to take a foreign vacation in six months, find out how much the flight tickets and accommodation will cost. Now break this sum down into six parts: you must save this much money every month to achieve this target.

Similarly, you might wish to hit a certain mark in your savings so as to invest that corpus in a fixed deposit or a mutual fund. Whatever your reason, you must begin by opening a savings account.

Using the savings account

Once you open your savings bank account, ensure that you deposit a certain sum of money in it every month. Also deposit any additional money that comes your way from a gift, increment at the office or an annual bonus. But the saving must be made first, before monthly expenses get in the way. Imagine, if you start by saving Rs 5,000 per month, you will have an extra Rs 60,000 in your savings account at the end of the year.

Budget 2016: A roadmap for progressive rural development

The Union Budget 2016 charted out a clear vision statement for the progress of India’s rural regions. We take stock of some key announcements.

Budget 2016-2017 was observed by many as an exercise in carrying forward and implementing some of the reforms announced in the previous budget. However, this financial year’s budget took a significant departure to focus on farming, agriculture and the country’s rural areas. Several significant announcements in Budget 2016-2017 were devoted to these areas, and if implemented correctly and efficiently, should boost India’s agriculture and rural business landscape to great heights.

In a nutshell, the following were key announcements for the rural areas as outlined by Budget 2016-2017:

1. 1 Mass welfare: Priority to be given to funding initiatives aimed at rural families. These include primary education, two wheeler loan and small business funding, incentives for women’s cooperatives, and special focus on drought-prone areas.
2. 2 Basic services: At least 5,500 villages were slotted to receive power by May 2016, Rs 19,000 crore to build roads in villages, cooking gas for BPL families, and Rs 9,000 crore for Swachh Bharat Abhiyan with special emphasis on clean villages and toilets for every home.
3. 3 Modernisation: 3,000 medical stores to be started under Jan Aushadhi Scheme till 2017, launch of agricultural e-market portal, digital literacy mission programmes, and new reforms in banking, insurance and infrastructure.
4. 4 Agriculture: 28.5 lakh hectares to be brought under irrigation programmes of Pradhan Mantri Krishi Sichai Yojana, Rs 412 crore for organic farming initiatives (5 lakh acres area being targeted for organic farming), Rs 5,500 crore from PM Fasal Bima Yojana, Rs 5,500 crore for crop insurance, Rs 17,000 crore for irrigation, aim to double farmers’ earnings by year 2020.

These initiatives will go a long way in uplifting India’s rural regions. A lot of untapped potential exists in India’s villages, held back owing to lack of opportunity, timely finance and even awareness about several welfare schemes. Meanwhile, several financial institutions in India are doing their bit to bring about a revival in the fortunes of India’s villages. These initiatives include simple and accessible banking and insurance services for the rural areas, as also funding opportunities for families like two wheeler loans and business loans to kick-start their own venture.