Best Retirement Plans and the Impact of GST on Insurance Premiums

Planning for retirement is smart. But understanding costs matters too. Let’s talk about both in simple terms.

Why is Retirement Planning Important?

You will live longer than previous generations. People now live 80-85 years or more. That’s 20-25 years after retirement. Who will pay your bills during those years? Your salary stops when you retire, but your expenses don’t. In fact, medical costs actually increase with age.

Inflation eats your money over time. Today’s 1 lakh won’t have the same value after 30 years. You need much more money than you think. Also, don’t depend entirely on your children. They have their own families and expenses to handle.

Features of the Best Retirement Plans

When looking for the best retirement plans, focus on these key features:

• Regular Income After Retirement: The plan should give you a monthly income, not just a one-time payment
• Flexibility in Payment: Good plans allow you to increase or pause payments when life changes
• Tax Benefits: Your contributions should save you tax now, and money received later should be tax-friendly
• Inflation Protection: Your pension should increase over time or corpus should beat inflation
• Life Cover: Some plans give insurance protection, so your family gets money if something happens before retirement

How Much Do You Need for Retirement?

Here’s a simple calculation method. Take your current monthly expenses and multiply by 12. That’s your yearly need. Now multiply by 25. That’s roughly what you need as retirement corpus.

For example, if your monthly expenses are 40,000 rupees, your yearly need is 4,80,000. Your retirement corpus needed would be around 1.2 crores. This is basic, so factor in inflation and medical costs.

Starting early makes a huge difference:

• Start at 25: Save 5,000 per month
• Start at 35: Save 12,000 per month
• Start at 45: Save 30,000 per month

All for the same retirement corpus. The difference is massive.

How GST Affects Your Retirement Planning?

GST on insurance premiums makes your retirement plans cost more. That 50,000 yearly premium becomes 59,000 after GST. When calculating how much to invest, remember to add GST. Don’t get surprised when the final amount is higher than you expected.

When comparing the best retirement plans, check the premium after GST. The actual cost is what matters, not the base premium. Also note that unlike premium, you don’t get a tax deduction on the GST paid. Only the base premium qualifies for tax benefits under Section 80C.

Can You Avoid GST?

The short answer is no. GST on insurance premiums is mandatory. You cannot avoid it. Every insurance product includes this tax. Instead of trying to avoid it, focus on value. Don’t pick plans just to save GST.

Focus on these factors instead:

• Coverage quality
• Returns offered
• Company reputation
• Claim settlement record

The 18% GST is the same everywhere, but benefits vary widely.

Tips for Smart Retirement Planning

• Diversify Your Investments: Don’t put all your money in one type of plan. Mix different options – some in pension plans for guaranteed income, some in NPS for market-linked growth, some in PPF for safe returns, and some in mutual funds for higher growth potential.
• Review Annually: Your retirement plan isn’t a one-time decision. If your income increased, invest more. If your goals change, adjust your plan accordingly.
• Don’t Stop SIPs: Markets fluctuate. Don’t panic. Continue your systematic investments, as long-term strategies always work.
• Calculate After-Tax Returns: Some schemes appear to offer high returns but are taxed heavily later. Calculate what you actually get after taxes.
• Include Healthcare Costs: Medical expenses are the most significant concern for retirement. Have separate health insurance and don’t rely solely on your retirement corpus.
• Consider Insurance-Based Plans: Some retirement plans come with life insurance coverage. This provides a dual benefit – your retirement corpus grows while your family remains protected. These plans are ideal if you require both savings and protection.

Read More: National One Cent Day: Celebrating the Legacy of America’s Smallest Coin

Common Mistakes to Avoid

Starting too late is the biggest mistake. Most people start planning after 40. By then, you will need to save much more. Start in your 20s or early 30s. Many people underestimate their expenses, thinking they’ll need only 20,000 per month. Reality is you’ll need much more after 20-30 years.

Other common mistakes include:

• Ignoring inflation (plan for at least 6-7% annual inflation)
• Not considering GST in the budget (50,000 investment becomes 59,000 with GST)
• Withdrawing early from retirement funds (keep a separate emergency fund instead)
• Not diversifying investments across different plans

Take Your First Step

Retirement planning seems complicated, but it’s simple if you start now. Choose from the best retirement plans available. Compare features, costs including GST, and benefits. Yes, GST on insurance premiums adds to your price, but don’t let that stop you. The cost of not planning is much higher than 18% GST.

Your future self will thank you for taking the first step today. Calculate your needs, pick your plans, and start investing. Your peaceful retirement begins with today’s decision.

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