Savings for retirement are important, but they are often ignored. There is plenty of time in it where some people ignore it by thought. At the same time, some people are satisfied that some of their salary goes to the Employees Provident Fund (EPF), but reliance on EPF contributions isn’t just right for retirement.
There are three major columns of financial planning for retirement in any country. Here are these:
- First column: Public pension
- Second column: Professional retirement
- Third column: Private or personal allowance
Those who are retirement funding need to understand these three. It should also know how this will affect their savings in retirement.
First column – Public pension
The first column meets the social insurance needs. It’s called a public pension, therefore. It’s used primarily to help the poor and the old. Such pension schemes are entirely run by the government.
This is an example of the Old Age Pension Scheme for Indira Gandhi. With the help of this scheme, the monthly assistance of Rs. 200 and Rs. 500 is given to people aged 60 and over 80. They are taking advantage of those who go below the poverty line.
The second column – Occupational Pension
It is for the second column salaried persons. In this case, the pension is arranged for staff working in government institutions or businesses. In 2004, the government changed the pension system. The government has increased in the direction of defined benefit contribution. This system does not apply to defense services.
The employee has to contribute substantially to the National Pension System (NPS) under the new system. However, it is optional to add NPS to private sector employees. These do, however, need to be added to the EPF.
Third column – Private or personal pension
The third pillar consists of the funds used for retirement. It includes Public Provident Fund (PPF), NPS, Atal Pension Scheme, Mutual Funds Retreat Plan, Insurance Company Pension Scheme, Fixed Deposit, etc. Money is invested in this for retirement.
How to save for retirement?
If someone has another pillar’s support, the third pillar should be used. That is, you should think about private pension choices even if you are contributing to NPS and RPF. Despite this it should be well prepared. You will need to decide how much money you need every month after your retirement.
First, remove existing values from the monthly expenditure. Then consider it expensive and increase it at a rate of 5 percent. This will tell you about the monthly after retirement expenditure you will need. See how much money you need to save now. On the internet, there are many such calculators that can help you with this.
