Reasons Why You Should Select ULIPs to Create a Retirement Corpus

Whether you are self-employed or salaried, money is never a problem when you are working. However, when you retire, the recurring cash flow in terms of profits or salaries comes to a standstill. You should build a retirement corpus to live the quality of life you desire even after you stop working.

When you are planning your retirement, you need to keep the inflation rates in mind as your income might be stagnant and your expenses could go up. Several senior citizens these days can easily maintain their lifestyle post-retirement. Financial planning has helped them live stress-free. When you retire, you should have a pool of money that is comfortable enough to let you live your life the way you want. Amongst the different investments that are available for your retirement, there are several types of ULIP schemes you can use for wealth creation.

ULIP is a two-in-one financial element that gives you life insurance along with returns on investment. The company uses the premium you pay for your ULIP as life cover, and they use the remaining sum as investments. Depending on your risk-taking ability, you can choose the type of ULIP that fits your financial goals.

Here are the reasons you should include ULIP in your retirement corpus-

Long-term wealth creation

ULIPs yield maximum benefits when you invest in them for the long haul. It is wise to invest in these plans for five years or more. Irrespective of which ULIP you choose, you will get returns on your investments in the long run. Along with that, it also entitled you to the sum assured when your ULIP matures. The life insurance element of ULIP helps to secure the lives of your loved ones in your absence while the investment quotient yields a return on investments. These funds prove to truly be handy while building a retirement corpus. Use a ULIP plan calculator to understand the amount of funds you will receive on maturity via different premium frequencies.

An anytime modifiable investment plan

There are several types of ULIP plans to choose from, based on your financial goals. If you choose an equity plan, you have a high risk and a chance of high returns too. Whereas, if you want to use ULIP as a safe investment, invest in debt funds as they are low risks (but offer low returns as well). If you want a balance of both, choose balanced funds. You can switch amongst these different investments, based on your ability to bear risk. This feature of ULIP is unique and makes it stand out from other types of investments. Also, when in need of urgent funds, you can opt for partial withdrawal too.

High returns (compared to traditional investments)

When you are filtering investments to build a portfolio for your retirement, there are two factors you usually would seek – returns and security. An average ULIP policy has huge returns when compared to other investments like FDs, bonds, endowments plans, or pensions plans. The reason for high returns is the diversified investment, with equity being a part of the fund. With equity funds or balanced funds, you can seek high returns without having to bear the immense risks of an actual equity market. ULIPs are a great financial instrument that offers high returns when compared to traditional investments.

A tax-exempt investment

A ULIP policy is a great financial investment for saving taxes. The premiums that you pay to continue your ULIP plans are exempt under section 10D of the Income Tax Act. Also, according to section 10 (10D) of the Income Tax Act of 1961, the sum assured that you receive on the maturity of your ULIP is tax-free. However, you need to ensure that the yearly premium you pay is less than 20 percent of the sum assured. ULIP is a perfect investment for creating tax-free wealth that will be useful for your retirement years.

An automatically managed portfolio

When you are purchasing a ULIP, use a ULIP plan calculator to plan your long-term investment. Once you choose a plan, the fund managers automatically manage the investment of your ULIP. Be it maintaining your portfolio risk, seeking benefits of the existing market opportunities, and ensuring that your wealth multiplies to its maximum capacity, the portfolio managers take care of it all. Automation allows you to live your life without having to worry about managing your investment.

ULIPs are a must-have part of your retirement corpus as they are a safe investment with great returns. They also secure the lives of your loved ones. When you are building a portfolio for your retirement, allocate your funds in multiple investments along with ULIPs. As always, it is always recommended to start as early as possible.