How to Plan Your Long-Term Financial Goals with ULIP Investment Plan

2024-08-02

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Whether you have just received your first salary cheque or started a family, you always have plenty of aspirations and goals in life. No matter how organised you are with the money somehow your goals always beat your income. However, that is only until you define your goals, make savings plans and have ways to work towards it.

Organising Your Financial Goals

So the first thing about beating, or more appropriately, meeting your goals is that your need to organise your goals. Organising is only the first step of planning, so let’s not confuse this as planning financial goals.

Before you can plan, you need to sort out the goals into the ones which need planning and the ones which don’t. You can also refer to these goals as ‘long-term goals’ and ‘short-term goals’ and then prioritise before you start planning.

You can plan all the goals in your urgent important matrix, except the kitchen expenses. The best way to manage kitchen expenses is to follow a monthly budget. However, for the rest of the goals, you can plan, save and invest money.

Most important of the three types of goals you can plan for are the long-term goals. Thus, this is where most of your planning efforts will go.

The Long-Term Financial Goals

Which goals occupy your mind when you think of long-term goals; i.e. goals which are not urgent but important in your life? Here are a few which you can commonly find relevant:

Purchasing first house property (home-ownership)
Child’s higher education goal
Child’s marriage goal
Retirement goal

Of all the goals you can add to the list, the retirement goal remains an exception to the investment planning strategy. Thus, we should try to keep the retirement planning separate from other goals.

Planning for Long-Term Financial Goal

Before we get into the use of ULIPs, you should have a clear understanding of your financial goal. The simplest way to develop a clear vision for your goal is to define them in the following terms:

Expected time to the goal
The present cost of the goal and it’s the future value
Your current investments you can allocate towards this goal

For example, if you are defining the higher education goal for your child, it could be defined as – Accumulate Rs. 50 lakh in 15 years, with present allocation at Rs. 1 lakh.

Using ULIP for Your Financial Goal

Once you have defined your goal, you can start customizing a ULIP investment plan as per your needs. ULIPs have a lot of features you can use to your advantage while saving for your long-term goals:

Wealth Boosters for Long-Term Investors

ULIPs are excellent long-term investment plans, as the longer you stay invested, the more benefits the offer. Wealth boosters especially benefit investors who stick with the plan for longer than five years.

The insurer will allocate bonus units to your portfolio every few years, provided:

You have been investing continuously
Policy and investment tenure is more than five years

Thus, to maximize your benefit from ULIP investment, you can use a single ULIP investment plan to meet multiple goals as well.

For example, your child’s education goal is 15 years away, while the marriage goal would be 20 years away. You can add your wealth-building goal to the same plan and continue investing for another 10 years.

Just remember that ULIPs have a lock-in period of five years. So, better not add a goal that is less than five years away to the ULIP investment plan.

Portfolio Management Strategies in ULIP

If you want to invest in equity markets but do not feel confident if you can benefit from it, ULIPs have the perfect solution for you. Invest 4G ULIP plan from Canara HSBC Life, offers four different portfolio strategies to help you with your equity investment.

These strategies offer you the following advantages:

Automatically manages your asset allocation without your intervention
Keep your investment risk from equity markets low
Take advantage of the market movements
Safeguard your returns from the equity market
Safeguard your portfolio value in the final years of your policy as you approach the goal

With Invest 4G plan you can choose at least two strategies to keep your intervention low in the investment plan.

Goal Protection & Life Cover in ULIP

Few goals like your child’s higher-education are too important for their future to be left to chance. For such goals, ULIP like Invest 4G plan provides additional protection. In case of your unfortunate demise before completing the goal, the insurer will:

Pay the life cover to your family immediately
Continue investing in your plan as you would have done, and pay the fund value at maturity to your family

This feature ensures that your child receives the money which you planned to provide for his/her higher education.

Tax Saving in ULIP Plans

ULIP is a life insurance plan and thus any premium you pay is eligible for deduction under section 80C up to the limits (current. Rs 1.5 lakhs). Also, any pay-out or withdrawal from the fund is exempt from tax under section 10(10)D.

But these exemptions are subject to the following conditions: The annual premium (investment) should be less than 10% of the life cover sum assured

Thus, while starting your new ULIP investment plan, you should ensure that the life cover in the policy is slightly higher than 10 times of your annual investment. This way, you can even deposit additional money in the future when possible, without incurring any tax liabilities.

Planning for Retirement Goal

The retirement plan takes precedence over all other financial goals. Whether you are married, have kids of your own or not, retirement is one goal you must prepare for. You can use ULIPs to achieve your retirement goal as well.

However, you should take care of the following when it comes to retirement goal:

You need to start investing for your retirement early even if the amount is very small
Since you are starting small, your investments will likely grow over time
It is better to use a retirement investment plan instead of ULIP in the early investment stage
Add ULIP to boost your retirement saving around the age of 30, when your income is high enough and you still have 20 to 30 years of investment period left

While traditional retirement solutions like NPS and PPF will allow incremental investments, ULIPs can boost your retirement corpus unlike any other. Plus, ULIP will also provide much-needed retirement safety to your spouse as well, in case anything happens to you.

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