Retirement planning

Retirement planning essentially is planning for a steady income after retiring from regular work. It is an investment option where the returns are payable after a gestation period. Individuals investing in retirement benefit schemes normally earn pension over an extended period.

Planning for retirement earning is best done during the course of regular job or practice. Saving regularly is the initial step towards planning for investment. The earlier an individual starts saving the higher is the amount of investment possible. All investments yield interest, and rate of interest earned on longer terms usually outweighs inflation rates.

The factors determining the need for retirement income plans are:

1. Quantification of retirement – It is very important to work out the planned expenses after retirement. Planned expenses vary from individual to individual and from one city to another.
2. Listing of current wealth and investments gives an indication of the gap existing between the actual earning potential and the desired expenditure
3. After identifying this gap plan investments accordingly which take closer to your desired expenditures.
4. The risks involved in these future investments are of vital consideration.
5. A constant review of available investments helps to mix and match future retirement income plans.


Retirement benefit investment plans are offered by banks, non-banking financial institutes and government agencies. In many countries post offices also extend retirement investment plans.

Criteria for choosing a retirement plan

After deciding for investing in a retirement scheme it is important to understand the benefits of the same. The criteria for selecting a retirement plan are:

1. Bonus is an important criterion for choosing a retirement policy. Some companies pay bonus on the total money invested, while others pay bonus on the premium amount.
2. Terminal bonus – In addition to annual bonus, certain companies also pay terminal bonus.
3. Life Coverage – A few companies provide life coverage to investors, and are always the better option compared to companies that do not.
4. Compounded returns – The interest payable is either simple or compounded. Since compound interest is always higher on a given principal sum compared to simple interest, investing in a scheme yielding compounded interest is preferable.