Approaching your late 20s brings a sense of career progress and newfound financial freedom. While you may have initially planned to invest, purchase life insurance, and save for retirement in your 30s or later, it is crucial to make the right financial decisions during this phase to avoid costly mistakes in the future. One key decision you should consider is investing in a guaranteed income plan.
So, what exactly is a guaranteed income plan, and how does it work? A guaranteed income plan is a type of life insurance policy that combines life cover with guaranteed savings. You have the flexibility to choose the sum assured, which represents the life cover offered by the policy and remains valid for a specified period, known as the policy term. If, unfortunately, something were to happen to you during this period, your beneficiary or nominee would receive the death benefits promised by the plan.
In addition to the life cover, a guaranteed income plan also provides assured maturity payouts. These payouts are disbursed at the end of the policy term if you survive the entire period. Since these maturity payouts are guaranteed, conservative investors looking for assured benefits find guaranteed income plans among the best investment options in India.
As with other life insurance plans, you will need to pay premiums to the insurer in exchange for the life cover. These premiums can be paid monthly, quarterly, semi-annually, or annually, depending on your preference.
Now that we understand how a guaranteed income plan functions let's delve into four reasons why investing in one during your late 20s is advantageous:
- Financial Security for Dependents: As you enter your late 20s, you might be married or planning to have children, or you might already have a family. In such a scenario, the potential loss of income due to any unfortunate event could financially burden your spouse and children. A guaranteed income plan acts as a dependable safety net, providing your loved ones with the necessary financial support in case of your absence.
- Fulfillment of Long-Term Goals: During your late 20s, you may have ambitious long-term financial goals, such as buying your dream home, clearing debts, or saving for your children's education. While these goals may seem distant, early planning with suitable strategies can make achieving them easier. A guaranteed income plan, with its guaranteed maturity payouts in the form of a lump sum amount, can serve as an effective strategy to fund your long-term aspirations.
- Effective Retirement Planning: Retirement planning is another essential long-term goal that necessitates early attention. While you might have considered postponing retirement planning until your 40s or 50s, purchasing a guaranteed income plan in your late 20s allows you to get a headstart and plan for retirement more effectively. The guaranteed benefits from the guaranteed income plan can significantly contribute to your retirement corpus, and some plans even offer the option of receiving payouts as regular income post-retirement.
- Reduced Tax Liability: As you progress through your late 20s, your income likely increases due to pay raises and promotions, leading to higher tax liability. By investing in a guaranteed income plan, you can avail of tax benefits under section 80C of the Income Tax Act, 1961. The premiums paid for the plan are deductible from your total income, up to Rs. 1.5 lakhs per year, thus reducing your overall taxable income and tax liability.
In conclusion, purchasing a life insurance plan in your younger years not only ensures lower premiums but also secures significant life cover at more affordable rates. As you age, life insurers tend to charge higher premiums, making it even more advantageous to lock in better rates by investing in a guaranteed income plan during your late 20s.
