Retirement Plans provide people with financial security  meanwhile when your  income starts to go down, people can still live with glory or proud without compromising on there living standards and life style. Providing them a source to accumulate and invest there savings all these type of plans give people a lump sum amount of money on there retirement time, thus which is then used to get a regular earning or income through an annuity plan. In this got the higher value of living standard and coming extension, employer pensions are not sufficient alone. This kind of planning has therefore become difficult today. In India the average of life presumption is scaled to increase to over 75 years from the past and present level of close to 65 years. Period of Life have been increasing due to good health and according to sanitation situations in the country. The average count of years of employment has not been rising proportionate. In result an increase in the count of post-retirement years. It has become needed to ensure the regular incomes or earnings for life after the retirement, cause people can live with glory and enjoy in there twilight of the life years.

 

Pension plan is benefit plan for employee maintained by an employer or can say by an employee organization or both that provides income after retirement or  provide income until the termination of committed employment or beyond. there are many  types of retirement plans. Like defined benefit plans, defined contribution plans. In defined benefit plans it promises a monthly income or benefit after the retirement. This may be calculated benefit through the plan formula that includes factors like salary and service. Secondly in defined contribution plan it does not promises an amount of benefit after retirement. In such plans the employee or the employer may be both contributes to the employee's account comes under the plan, many times at the set rate like as 4 or 5 percent of income annually. The employee will automatically receive the balance in the account, this is based on the contributions plus or minus investment. Thus the value of the account will change due to the changes in the value of the investment. Another one the cash balance plan is defined benefit plan that define the profits in such terms which are more attribute of a defined contribution plan. We can say also this cash balance plan defines the promised profits in terms of a fixed account balance in account.

 

Typical cash balance plan, an actively involved account is credited each year with a pay credit and an interest credit that is linked to an index such as the one-year Treasury bill rate. Decreases and increases in value of the plan investments do not affect directly the profit amounts promised to sharer. So the investment risks and claims on plan things are borne by the employer. On time, when a participant allow to receive profit under a cash balance plan, profits that are received are defined in terms of account balance. Profits in  cash balance plans are in most traditional defined benefit plans and protected within some limits, through federal insurance provided through the Pension Benefit Guaranty Corporation.

Agastya Financial