The risks in human life arise out of both dying too early and living too long. The concerns of living too long are acquiring great importance. Longevity is increasing. The number of old persons is increasing considerably in almost all the countries. It is estimated that 8.8% of overall world population is to be over 65 years of age.
Every individual wants to have a tension free and peaceful retired life after years of hard work. However with the rising inflation and people preferring to live in nuclear families one cannot expect to have a tension free life unless one has accumulated great wealth, inherited a huge sum of money or at least have a retirement plan/pension plan. A person investing in a pension plan would receive a corpus amount during retirement which would be useful for paying the annuities to him, thus ensuring that he has the same standard of living as he was having before.Retirement Plan Calculator
How does it work?
The working of a pension plan can be explained under the following two phases – Accumulation phase and Distribution Phase.
Accumulation Phase – During the accumulation phase, an individual either invests in a regular retirement plan or in a lump sum so that he could have accumulated wealth in future.
Distribution Phase – This phase may be described as the phase when accumulated wealth is being used for paying the annuities to the policy holder.
The types of pension plans:
There are different types of pension plans available in the market these days. They can be categorized as follows: