Table of Content

1. Types of ULIP Plans Offered for Retirement

2. How Do ULIPs Help in Retirement

3. What Are the Benefits of ULIPs in Retirement?

4. How to Choose the Right ULIP for Retirement?

In this policy, the investment risks in the investment portfolio is borne by the policyholder

Working individuals often worry about saving enough to enjoy a financially secure retirement. You must carefully plan your investment to enjoy your golden years. A Unit-Linked Insurance Plan (ULIP) provides insurance coverage and investment opportunities, helping you secure your retired life with market-linked returns. Let's better understand how ULIPs can help you plan your retirement finances.

Types of ULIP Plans Offered for Retirement

Many insurance companies offer specific ULIP plans to help you secure your retirement. All ULIPs come with a five-year lock-in period, making them the ideal financial tool to plan your long-term finances and retirements. Depending on how long you have to build a corpus, you can choose a ULIP for retirement policy tenure that suits your needs. Additionally, you can look for ULIPs with plan options and fund options that align with your risk appetite and retirement goals.

How Do ULIPs Help in Retirement

Let's see how you can use a ULIP for retirement:

• Market-Linked Returns

  ULIPs invest in equity, debt or a combination of both, depending on the investor's risk appetite. These market-linked funds help generate higher returns over the long term.

• Investment Flexibility

  ULIPs offer flexibility in choosing the premium payment term and investment options. Investors can customise their investment portfolio based on their risk appetite and financial goals.

• Insurance Coverage

  ULIPs provide insurance coverage along with investment benefits. The insurance component helps secure the policyholder's family's financial future.

• Tax Benefits

  1. Savings Plans

     1. Tax deduction under Section 80C^#

        Premiums paid in a financial year towards premium of ULIP savings plans are eligible for a deduction under Section 80C^# up to the limit of Rs. 1,50,000/- in a financial year.

     2. Tax exemption on maturity/death proceeds

        Proceeds received on maturity of ULIP plan are exempt from tax subject to provisions mentioned in Section 10(10D)^# i.e if the premium payable for any of the years during the policy term does not exceeds 10% of the death sum assured.

     In addition to the above, for policies issued after 1st Feb 2021 tax exemption on maturity proceeds will be available if premium paid in any of the years towards such matured polices does not exceed Rs.2,50,000. Out of the total matured policies in a financial year, exemption u/s 10(10D) will be available only towards those polices who’s aggregate premium in any years does not exceed Rs. 2,50,000/.

     Rest policies exceeding the mentioned limit will be chargeable as capital gains.

     Death proceeds shall be exempt from tax for all ULIP plans.

  2. Pension/Annuity Plans

     1. Tax deduction u/s 80CCC

        Premiums paid in a financial year towards pension/annuity plan for receiving pension from a fund are eligible for deduction under Section 80CCC^# up to the limit of Rs. 1,50,000/- in a financial year.

     2. Tax exemption u/s 10(10A)

        Any payment received in commutation of pension as a lump sum on maturity is exempt under section 10(10A) of the Income-tax Act, 1961, subject to fulfilment of various conditions under the current income-tax law.

     Regular annuity pay-outs under an annuity plan are taxable.

What Are the Benefits of ULIPs in Retirement?

When you choose a ULIP for retirement, you enjoy the following benefits:

• Capital Appreciation

  ULIPs provide long-term investment options that help build wealth over time. By investing in a ULIP plan, individuals can benefit from capital appreciation in the long run.

• Tax Breaks

  ULIPs offer tax deductions under Section 80C^#, 80CCC^# and tax exemptions under Section 10(10A) & Section 10(10D) of the Income Tax Act, 1961, as the case may be, subject to fulfilment of various conditions under the current income-tax law.

• Investment Control

  ULIPs let investors choose how the funds get invested. You can select a mix of equity and debt funds and even make switches during the policy term to take advantage of market fluctuations.

• Regular Income

  You can receive your ULIP maturity benefits in monthly instalments, providing you with a regular income once you retire.

How to Choose the Right ULIP for Retirement?

Choosing the right ULIP plan for retirement can be a daunting task. Here are some factors that individuals should consider when choosing a ULIP for retirement:

• Investment Horizon

  Individuals should choose a ULIP plan with a long investment horizon of at least 10 to 15 years to benefit from capital appreciation.

• Risk Appetite

  Individuals should consider their risk profile when choosing a ULIP plan. Risk-averse investors may opt for debt-oriented ULIP plans. Those willing to take risks may choose equity-oriented plans.

• Charges

  Individuals should also consider the charges associated with the ULIP plan, such as premium allocation, mortality, fund management, and surrender charges. Find a plan with low fees to maximise returns.

• Fund Performance

  Individuals should also consider the past performance of the ULIP fund before investing. Although past performance is not indicative of future performance, it can help investors make informed decisions. They should choose funds that have outperformed their benchmarks consistently.

• Flexibility

  Investors should also consider the flexibility the ULIP plan offers. Some plans limit the number of fund switches or limit partial withdrawals after the five-year lock-in period.

ULIPs can be an effective investment tool for retirement planning, as they offer long-term investment options, tax benefits, life insurance coverage, and flexibility. Individuals should choose a ULIP plan based on their investment horizon, risk profile, charges, fund performance, and flexibility. Identifying the right ULIP plan lets you enjoy a comfortable and financially secure retirement.

Related Article

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• 6 Tips to Maximize your Gains from ULIP
• Benefits of Buying Online ULIP over Offline ULIP - Explained

ARN - MC/06/23/2690