Waiting until the last minute often leads to hasty decisions, which may not be aligned with your long-term goals.
We are soon nearing the end of 2024, which is a good time to reflect on the past year. It’s time to reflect on our choices – did we do all we could to make our year the best it could be, but also ensure that our futures also benefit from the actions we took this year? This is as true for our financial decisions as it is for our people.
The turn of the year is of course a time for celebration, but it’s also a time for new resolutions. It is also an important checkpoint to review our financial planning. And with the end of the financial year still a few months away, the turn of the calendar year is also a great opportunity to take stock of your finances and close the gaps, if any. This can be from a tax planning angle or from the perspective of retirement planning and achieving your financial goals.
However, with so many investment options available in the market, it can sometimes be difficult to decide where to start and where to invest. So we’ve put together a step-by-step guide to help you make smart, year-end financial decisions.
Tax savings and wealth creation
Tax planning is one of the most important factors in making investment decisions for most Indians. Miss this window and you could end up paying more tax than you should. Another factor is building an adequate corpus to ensure that you are not dependent on anyone during your retirement years. Then there are some investment requirements that you need to ensure that your financial plans never get derailed even in a crisis.
Let’s take a look at how you can achieve all three of these goals.
Term Insurance: Term insurance is rightly considered the foundation of all financial planning. While you may have investments that offer returns, nothing beats the safety net of a pure-term plan. These plans are one of the simplest yet most effective investments you can make. The size of the insurance cover term plan offered is significantly higher at a very affordable premium. Of course, tax savings are another reason to go for it. These schemes cover the premium paid under section 80C of Rs. Offers tax benefits up to 150,000. Even if you have other types of insurance plans that offer life cover, don’t forget to opt for term insurance. You can also add riders to these plans to further increase the utility of your policy.
Guaranteed Return Plans: If you are looking for investments that have no risk, then guaranteed return schemes come out as a great option. These long-term schemes offer fixed returns of up to 7%, completely unaffected by market fluctuations. The good news is that many of these guaranteed compensation plans offer the dual benefits of guaranteed compensation with the added cover of life insurance. So if the policyholder dies during the policy term, the insurance component of the plan kicks in to protect the family. They pay a lump sum to cover their expenses and achieve their financial goals. So while you can build wealth systematically over time, your family is also protected against unforeseen circumstances.
These plans also come with flexible tenure options with tenure as short as five years. Or you can lock in the rate of return for up to 30 years. The certainty of receiving fixed and high returns over 30 years can provide financial security that no other instrument can. The cherry on the cake is that the returns under these schemes are tax-free. Moreover, you can claim tax deduction on the premium you pay under Section 80C, making them a wise investment choice.
ULIP: If you are not sure and willing to take more risks, ULIP or Unit Linked Insurance Plans are ideal for you. These plans also offer dual benefits of insurance and investment. These schemes also come with tax benefits. The main difference is that the returns of these schemes are linked to the market. You can choose schemes that invest in equity or debt. You can also opt for balanced fund schemes that offset some of the market risk with the certainty of bonds.
If the goal of life is retirement, then these new age ULIP pension plans have emerged as an innovative tool to build a retirement corpus. This can be seen as a type of ULIP but is specifically designed for retirement planning. Like ULIPs, these plans invest in a mix of equity and debt funds and give you the flexibility to adjust your portfolio according to your risk appetite and financial goals. The main difference is that once you retire, you can withdraw up to 60 percent of your corpus while the remaining 40 percent is invested in an annuity. This gives you a regular income stream after your retirement.
Many ULIP pension plans come with a “pension booster” facility, which refunds core charges such as administration fees. This increases your returns significantly. Additionally, these plans allow partial withdrawals after five years for emergencies, making them a versatile choice for long-term retirement. Planning
Health Insurance: You may have covered your family’s future in the event of your death, but what if you or your family go through a medical emergency? Along with the high cost of medical care, such an event can derail your financial goals. So having a health insurance plan is essential to protect your financial future from such circumstances. A comprehensive health cover protects you from rising medical expenses. It also gives you peace of mind during emergencies.
Additionally, premiums paid on health insurance policies are also eligible for tax benefits under section 80D. If you are also buying health insurance for your senior citizen parents, you can pay Rs. Can claim a deduction of up to 75,000.
The end of the year is not just a symbolic milestone but a practical deadline for making tax saving investments and ensuring your financial portfolio is on track. Waiting until the last minute often leads to hasty decisions, which may not be aligned with your long-term goals.