ULIPs for senior citizens: how to invest in your retirement age


Here is the story of Mr. Gupta, a software engineer who chose to retire early at the age of 50. Although Guptaji had managed to build a decent retirement corpus, he was anxious that the corpus might not be able to help him and his wife sustain for the remaining of their sunset years. Guptaji started looking out for an investment scheme, but was sceptical about which one to invest in considering he had taken voluntary retirement and had to start living on a limited fixed income. That is when Guptaji was introduced to Unit Linked Insurance Plansor ULIP plans by a former colleague. The colleague himself had invested in a ULIP and reaped benefits from this unique investment plan. Guptajiconsidered the advice and consulted a financial advisor who helped them understand how ULIP works and how it can do wonders for investors in the retirement age group. Guptaji was happy that he managed to invest in a scheme that not only offers decent capital appreciation but also gave him an opportunity to make a safe investment.

What is ULIP?

Unit Linked Insurance Plan or ULIP as it is commonly referred to, is a market-linked scheme that offers benefits to investors upon completion of the lock-in period. It gives investors insurance benefits along with an opportunity to earn long-term capital gains through investment in various fund options. ULIP provides investors a coverage for their plan and also invests a certain portion of their corpus in equity and debt related instruments. Depending on their risk appetite, investors may choose how to diversify their ULIP portfolio with equity and debt funds. Investors can choose how to diversify their assets depending on their investment objective and financial goals.

Here are some of the reasons why ULIPs might be suitable for retired as well as senior citizens:

Life cover: The primary benefit of ULIP plans is that they offer life cover to the policyholder. A life cover is always a good option when it comes to investments as it makes sure that the nominee/s of the policy holder receive the assured sum in case any unexpected happens to the policy holder.

Partial Withdrawals: With old age comes high medical bills. And in such a situation, if the retired individual hasn’t invested in a feasible healthcare plan, there might be exigencies where they might be in need of urgent cash. During such vulnerable moments, ULIPs come extremely handy as they allow policy holders to make partial withdrawals. However these partial withdrawals are only available after a certain time frame. ULIPs come with a 5 year lock in period and once this period is over, investors can withdraw from their accumulated corpus and tend to medical emergencies or any other sudden expenses that may occur.

Flexibility: ULIPs are flexible in nature. Investors have the option of switching between different ULIP funds. As time passes, it is natural that the investor’s financial goals may change. Thus if investors feel that they need an aggressive portfolio to fetch better returns, they can switch from debt and invest only in equity funds. However, investors should bear in mind that the golden rule of mutual fund investments is not to keep all your eggs in one basket. Hence, while switching between funds or while rebalancing their portfolio, investors should be very careful.

Tax benefits: As per the Indian Income Tax Act, 1961 premiums paid towards ULIP plans are eligible for tax deductions. This way through investments in ULIPs, investors can bring down their overall tax liability. Investors are exempted from taxes even on the maturity amount that they receive at the end of the 5 year lock-in period.

These were some of the reasons why someone who is retired or nearing retirement should consider investing in a ULIP plan. But since ULIPs are market linked schemes, investors should determine their risk appetite before making the final investment decision.




What do you think?

Written by Michael Curry

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