I Already Have a Term Plan. Do I Need a Retirement Plan?

Financial planning is essential at every stage of life. Whether you are a young adult or in your late 40s, knowing the right financial tools to invest in is crucial to determining your future life. However, the decision to invest in more than one insurance policy is still a debatable topic.

The popularity ofterm life insurance for all age groups is the main reason behind its increasing demand in the market. Moreover, with the added flexibility of comparing different term plans online using a term insurance calculator, people limit their investment options to just term plans alone.

But is it enough? Does a term plan support retirement planning goals as well? Let us find out.

What is a Term Plan?

A term life insurance plan is a basic insurance plan that offers financial security to your family members or loved ones in your absence. It is a life insurance plan that primarily only offers death benefits to support the policyholder’s dependents in case of an unfortunate incident of the policyholder’s death.

Most insurers offer a list of add-on benefits that you can combine with your base term life plan to get cover for other aspects like accidental death, critical illness, etc. Except this, it does not offer any liquidity benefit for immediate use in case of emergency and might not suffice to fulfil the policyholder’s financial goals for the future.

Why is a Retirement Plan Important?

Planning for retirement is necessary to lead a stress-free life without feeling financially dependent on others for day-to-day expenses. A term plan only offers death benefits to your dependents, with no benefit if you survive the maturity of the tenure, except for some specific term plans.

Therefore, combining a term plan with a retirement plan or a pension plan is beneficial as it offers the following advantages.

Additional Safety Net

A term plan does offer a safety net for your family members in case of your demise. However, it offers no financial backup for you to lead a convenient life post-retirement. With a retirement plan, however, you can enjoy your non-working years of second innings with the lump sum savings you had invested for a long time, accumulating sufficient wealth for you to enjoy your life.

Liquidity Post-Retirement

After retirement, you will not have any regular income stream accommodating your day-to-day expenses. With the help of a retirement plan, you have enough liquidity because of the savings and can easily take care of any unexpected medical or other emergency with the available funds. Moreover, it will support your lifestyle even after retirement.

Protection of Assets

A term plan does provide your family with claim settlement to help clear all your debts and liabilities. However, there is no guarantee that the settlement amount will suffice, which can force your family members to sell your assets to get the money.

However, combining a term plan with a retirement plan will let you protect your assets as there will be ample savings to cover the debts and abilities or loan repayments, if any.

Wrapping Up

After many years of hard work, every person deserves a stress-free retirement. A term plan as an investment tool is great for financial planning and safeguarding the future of your family members.

However, a retirement plan is also crucial to ensure you have enough financial support during your second innings, without any indirect dependency on others. Whether you have a term plan or not, investing in a retirement plan is also necessary, so plan and invest wisely.

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