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Bhawani Pathania
Millennials - persons reaching adulthood around year 2000 - view their career and retirement goals differently from what their parents did.
They usually do not wait to reach the age of 60 before pursuing their dreams. They want to fulfil their ambitions now - whether it is starting a new venture, going on a trip across the world or supporting a cause or contributing to a non-profit undertaking.
With a career that doesn’t fit the existing norm, emerges the need for a new financial strategy to plan for retirement. A longer retirement period in the life cycle of most individuals points to a need for a larger corpus of savings to see them through their twilight years.
However, millennials also need to understand that as they approach the later years of their life, ensuring continued comfort and security for the family will gain more importance. From living in the moment, life will change to thinking about the future. It is, therefore, critical that the millennials adopt a systematic and regular investment approach to building a nest egg which can ensure financial security during retirement years.
There are numerous investment options available in the market that enable one to plan ahead and achieve the desired retirement corpus, provided one starts investment at an early age.
Ideally, a combination of these options can help one form a complete retirement portfolio based on age and risk profile. Some of the effective tools that can be used to plan retirement are retirement/pension plans, endowment products and a mixed bag of public provident fund, fixed deposits and equities.
Let's take a look at how these can be utilised for maximum benefit.
Retirement/pension schemes
Offered by insurance and mutual fund companies, these long-term plans can be very useful in building your corpus for life post-retirement. These often give you the option of claiming up to 30% of your sum as lump sum at the maturity of the plan while the rest is paid off in annuitised payments.
This ensures that your retirement corpus is available to you not only as a windfall payment but also as a steady stream of capital and can be used for regular expenditure like household and medical expenses.
The additional benefit of this product from an insurance company is the protection factor. The spouse/nominee can continue to benefit from this even if something happens to the policyholder.
Endowment plans
These are a good option for those customers who are looking to build a corpus while avoiding risk.
Through these plans, one pays a regular premium for a specified tenure. At the end of the period, there is a guaranteed accumulated corpus. This can be used to either pay off existing loans or can be re-invested, depending upon one's financial goals at the time.
Low risk and traditional insurance products such as these are generally advantageous as they pay the sum assured or life cover to the policyholder's family even if they do not survive the duration of the policy. They are also not impacted by market volatility.
In addition, one can even opt for a mix of public provident savings schemes, fixed deposits and investments in equities through ULIPs and mutual funds in order to beat inflation costs. Millennials usually experiment and do something different. However, when it comes to financial planning, a systematic, timely and stable approach is the key.
The writer is Director — Agency Sales, PNB MetLife. The views expressed in this article are his own
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