Here is a reader’s query. The reader is from Bangalore. The reader wants to choose a Best Pension Plan for her retirement.

“Hi,
This is ***** (Reader). I am from Bangalore and I have 0 knowledge in finance and investment.
I am 39 year's old and I am looking for a best pension plan as returns from me turning 50.
Kindly suggest whats the best way I can go about this.
I can invest 10 k every month.
regards”

Well, Insurance Companies offer 2 kinds of pension plans -

01) Endowment &

02) Unit Linked (ULIPS).

The reason why people go for the above 2 plans is not because they are the Best Schemes but actually Insurance Companies market the both of the above products very aggressively. And that’s why people go for both of the above Pension Plans.

Endowment Plans - Endowment plans give you 2 benefits – Insurance (Life Cover) + Savings

Endowment plans are life insurance plans, which not only cover the individual's life in case of an eventuality but also offer a maturity value at the end of the term. In the event of the individual's demise, his nominees receive the sum assured with accumulated profits/bonus on investments (till the time of his demise). In case the individual survives the tenure, he receives the sum assured and accumulated profits/bonus.

ULIPS (Unit Linked Insurance Plans) – Now ULIPS offer 2 Benefits = Insurance + Investment.

Suppose you invest Rs.10,000 per month in ULIPs than it will deduct 1000-2000 (10-20%) as a Life Insurance premium charge and other administrative charge and invest rest of the money in the stock market.

In short, ULIPs are nothing but the Opaque Mutual Funds which charge anywhere between 10-20% entry load from you while Mutual Funds will charge just 0-2.5% Entry load from you.

Solution -

So the question comes – if your Financial Knowledge is ZERO and your age is 39 years today than what should be the solution of your Query? Well, here are 2 possible suggestions of your query.

Suggestion: 1 Don’t go for Endowment or ULIPs. Both of these are not at all effective Pension Plans to build a sufficient retirement corpus.

Go for – Term Life Insurance + Mutual Funds.

Buy a separate term life Insurance Policy & buy 4-5 star rated Equity Diversified Mutual Funds from Valueresearchonline.com. Start SIP of Rs.10,000 per month in some good 4-5 star rated Equity Diversified Mutual Fund.

The above thing will fulfill both of the needs of Pension Plan – Insurance + Investment.

Remember, Never Mix Insurance + Savings (Endowment Policy) or Insurance + Investments (ULIPS).

Pension Plan = Insurance (Life Cover) + Investment to build desired corpus for your Retirement and that’s why Your Pension Plan = Term Life Insurance Policy + Good Equity Diversified Mutual Funds.

Suggestion: 2 Increase your Financial IQ. It is true that, you are 39 and you don’t have any financial IQ but it doesn’t mean that you give this excuse every time and live your life financially illiterate.

Because if you don’t know how to manage your money than millions of people in this world know that what to do with your money – Take it from you and fly away…!!!

Cut down your TV and Entertainment hours every week and spend this time behind reading Books, Blogs, Personal Finance Magazines, News papers…etc… If you don’t like to read than go to Amazon.com and buy Audios and Videos from famous Finance Gurus and listen and watch it……

Instead of investing 10,000 per month in the pension plan, invest 2,000 in your own Financial Knowledge for next 10 years and invest just 8,000 in a pension plan that I have suggested you….

Believe me,…. It will help you gain unbeliavably high Returns…..

Benjamin Franklin once said, “Investment in your own Knowledge (Financial Knowledge) will give you best Dividends (Returns) in the Long run than your any other Investment.”….