It might seem that worrying about our future is something that scares us. But it actually doesn’t have to be that way. We all desire a good life with no concern over money. To make sure of that, the Indians are mainly turning to two saving options. One is a retirement plan, and the other is a money-back policy.
Both are great, but they work very differently. Which one to go for depends on your requirements and your time of need. Let us explain each one in a very simple way so that you can choose what is the most suitable for your family.
What is a Retirement Plan?
Retirement plan is a very long-term investment. In fact, it is designed to achieve just one thing: to support you financially after you quit your job. So, throughout your working years, you invest money in this plan. That money will keep growing without any friction for years.
Once you get old and retire, the plan will turn into a stream of income for you (a pension). This financial support is like having a monthly paycheck. It is there to assist you with buying food and medicines and to maintain your independence and dignity without having to ask for help from others.
If you start early, the best retirement plan in India can help you build a massive pile of savings because of compounding. Compounding is just the process of getting interest on the principal and also on the accumulated interest. It will transform your small contributions into a large corpus over a period of twenty or thirty years.
What is a Money Back Policy?
A money back policy is one form of life insurance scheme, but it has its distinctive feature. An ordinary life insurance plan provides financial support for your family if something unfortunate takes place to you only. Whereas a money-back plan provides you with the money even though you are alive and healthy.
With a policy like this, you make premium payments for a fixed number of years. Afterward, the insurance company returns a portion of the total amount to you at predetermined intervals typically every five years. So, if it’s a twenty-year plan, you might receive money back in the fifth, tenth, and fifteenth years. Lastly, when the policy matures, the remaining money along with the extra bonus are yours.
During the policy term, if anything happens to you, your family will receive the full sum assured. In that way, it’s not only providing financial protection to your family but also giving you cash when you really need it.
Main differences
First of all, think about the primary purpose of each type of plan. A retirement plan is mainly about ensuring your financial security after you give up work, while a money-back policy tries to balance giving you cash now and then, along with life insurance coverage.
Consequently, the decision about when you finally get your cash becomes very different. In the case of a retirement plan, the only time you get the money is when you retire from work. A money-back plan, on the contrary, gives you some cash back every few years while you still have the policy.
Because of this difference in time, the way your money grows also changes. A retirement plan provides high growth potential as your savings remain untouched for a very long time. A money back policy, in contrast, generally results in lower growth because you are taking money out before it has time to sit and compound.
Lastly, let’s consider life insurance cover. A retirement plan might not provide much life insurance, or even none, if its primary function is to pay out a pension. However, a money-back plan always comes with a solid life insurance cover.
Who Will Win Your Future? Or Which One Is Better in This Scenario? Strangely, the real answer is that one is not better than the other at all. They are simply geared for different phases of your life.
Go for a Retirement Plan If:
- You want to have your life after sixty secured in every way.
- Your requirement is a fixed monthly income resembling a regular salary.
- You do not require any cash at present and can let your money grow for a long time.
- Finding a retirement plan in India that can beat the rise in prices in the future is what you are after.
Go for a Money Back Policy If:
- You are expecting major expenses in the next few years, like your child going to college or getting married.
- You plan to buy a house/car in the near future, and you need a large sum of money for that.
- You want to have regular payouts and, at the same time, keep your loved ones safe with a life insurance policy.
One piece of advice for safety: Make sure to go through the fine print of any plan you are buying. Verify that the company is trustworthy and has a good track record in resolving customer issues swiftly.
Making the Final Move
A retirement plan is like a train trip through life, where you get onto the train today, and it takes you all the way to the final destination of old age in an unbroken way.
Money back policy is like a car trip on the highway where you stop at roadside restaurants for snacks and to refresh yourself before moving on again. Both are wonderful experiences but take you to different places.
The best and smartest thing to do if you can afford it is to use both. You can invest some money in the top retirement plan in India so that your old age is free from worries, and at the same time, the money-back policy can be for fulfilling the needs of the family, which is the present concern. Discuss with your family and see your monthly budget, and select the one that makes you feel secure now and happy afterward. Your future will thank you for your present wisdom.
