Achieve financial goals with ULIPs
Marriage brings happiness, hope, prosperity and a life for sharing both ups and downs which also entails many responsibilities. Once married, two individuals need to understand they are partners for life and, hence, they need to take financial planning seriously to secure their futures. Creating wealth over the long run means meeting all life-term goals, including raising children and having enough money after retirement.
The basic first - A successful marriage between two persons is based on mutual trust. And this means coming clean with each other's monetary skeletons in the closet, if any. Disclose all your assets, income and debt or commitment of a financial infidelity.
Once the basic has been taken care of, following are some tips that may be useful in planning your financial future:
Share your financial plans
It is inevitable that all couples needs to craft their finances in a planned manner that suits both. This is possible only if the couple talk about their current financial standing and desires. Discuss your credit card payments, existing loans, bill payments, house rent, investments etc with your partner. Money does not understand emotions and hence, it is better to talk and clarify your finances soon after marriage rather than wait till things become more complicated and unavoidable.
Buy insurance policy
Now that you are married, you have an added responsibility. Thus, the most important thing to start with is a life insurance policy that provides adequate coverage besides other financial benefits. Those who already have insurance policies may re-evaluate them to update their beneficiary information and consider adding an extra coverage to increase the sum assured in case of untimely death of either partner. For new couples starting out, this is the time to seek policies for both individuals regardless of who has a higher income.
It is best to remember that even if income is not a concern, life insurance helps pay for expenses in case of any unforeseen event.
It makes sense to cover for life risk earlier, i.e. soon after marriage as the cost of insurance will rise as you grow older.
Buy health insurance plan
Another factor that needs your attention is healthcare. Most of us tend to avoid this since most couples today are working and covered by their employers through the group insurance scheme. However, the question that needs to be asked is "is the cover enough". And before you answer the question, remember that medical costs are on the rise at almost 15-20% annually.
Keep premiums aside for once and evaluate buying an additional policy that covers both of you. Sometimes it's better to avoid a short-term benefit that results in long-term out-of-pocket expenses.
Plan your retirement NOW
I know what you are thinking - "I've just got married, why do I need to think of retirement now? Isn't it too early?" Before you realise it, years would have flown by, leaving you scratching your head. In fact it is already late, you should have bought your first retirement planning solution the moment you started to work.
If you already have a retirement plan, think about altering it post marriage - it is always better to plan your retirement together in case both of you are working. Couples need to consider a few factors such as if one wants to retire early or quitting the job to do something else such as starting a business. It is important to find out what impact it will have on your retirement corpus. You also need to reassess your joint needs and aspirations.
It is okay to start in a small way on retirement planning and step up contribution as your income rises.
Get adviser onboard
Seeking an expert's advice on your current as well as future savings/investment options is recommended. Also, for the newlyweds, one of the major life events is the birth of your child. You should save separately for it which will increase your expenses starting from hospitalisation to your kid's higher education and marriage.
It is imperative for the newlywed couples to think and plan their finances carefully since money is important and true marital bliss blossoms only through effective financial management.
The author is senior director & chief distribution officer, Max Life Insurance. The views expressed in this article are his own
Achieve financial goals with ULIPs
Generally, insurance plans are offered in two categories--- traditional and unit-linked insurance plans (ULIPs). Traditional plans, as the name suggests, are conventional ones that offer a high proportion of guaranteed returns, but come with a limited flexibility. On the other hand, ULIPs participate in the capital markets and give returns based on the performance of the underlying investments and offer flexibility in choosing an asset class, liquidity to withdraw in parts or full after five years to meet various financial goals.
ULIPs are goal-based financial solutions that can be used to provide an entry into the equity markets even for retail investors. Its hallmarks are features such as transparency, flexibility and convenience. With their link to the capital markets, they offer customers flexibility to invest in equity or debt funds depending upon his/her risk appetite. They are usually purchased with a long-term wealth planning horizon through a mix of equity and debt funds along with a protection cover.
Importance of ULIPs
Insurance companies offering ULIPs not only propose a professionally managed investment-cum-protection platform, but also provide an entry point into the growing equity market. The long-term performance of Indian equities has been better than most other asset class, with the BSE Sensex delivering over 13.7% CAGR (as on December 31, 2013) over the past 10 years. Following a long-term disciplined investment approach and remaining invested in equity even in uncertain times will ensure that investors reap the benefit from their financial investments. Alongside equity, investments in highest-rated debt instruments also make ULIPs a perfect choice for investors who are looking for a long-term financial instrument that offers flexibility to move between asset classes and transparency.
Plan long-term goals with ULIPs
ULIPS are offered under various categories such as child, retirement, wealth building etc. For instance, a ULIP child plan is bought by a customer to build wealth towards milestones of their children. With regards to retirement, the customers bring ULIPs to beat inflation and build a robust corpus at the end of their policy term. Similarly, ULIPs can be purchased for various needs and reasons depending upon one's needs. However, one should also focus on the long-term nature of ULIP funds. Insurance funds are long-term investment options. Insurance equity funds are not under pressure to choose "momentum" at the cost of "long-term fundamentals" and can afford to take a long-term view while investing. Thus, they make for a powerful financial planning strategy for policyholders.
Features of ULIPs
Investing in a ULIP provides you expertise in fund management, multiple options to choose a fund on which the premiums will be invested and various investment strategies like, for instance, opportunist and balanced approaches.
A ULIP can help you balance and realign your portfolio. It allows you to shift your money from one fund to another without disturbing your long-term financial plan by using fund switch and premium redirection or partial withdrawal options. You can also shift your money from equity funds to debt funds or vice-versa while the premium redirection strategy allows you to redirect future premiums to any fund of your choice while keeping your existing fund composition intact.
This option in a ULIP provides the flexibility to its policyholders to 'partially' withdraw some money from the accumulated fund within the policy term.
A ULIP provides tax benefits under Section 80C & 10(10D) as per prevailing laws. In 2013, the Insurance Regulatory Development Authority (IRDA) introduced a number of guidelines to further revamp ULIPs. In their new avatar, ULIPs today are by far the most customer-centric products and are at a level playing field vis-ŕ-vis other similar investment avenues.
Finally, aligning your ULIP fund to suit your risk profile and reviewing the same periodically to suit changing needs can ensure balanced growth and risk exposure for your funds. While investing in ULIPs, an investor should keep in mind charges applicable, investment options offered, limitations and exclusions mentioned in the policy document, lapsing and its consequences, various disclosures required and benefits offered.
The author is Head, e-business, marketing and product management, IDBI Federal Life Insurance. The views expressed in this article are his own
My PPF (HUF) account matured on March 31, 2004. The account was extended with a subscription for a block period of five years and it was re-matured on March 31, 2009. A CA and an accounts officer of the SBI advised me to extend the account for another five years as no new PPF (HUF) account can be opened now as per the government notification GSR 291 (E) dated May 31, 2005.
Shall I continue the account with subscription or without in view of the amendments to the PPF Scheme vide notification dated May 31, 2005, which are as under:
(i) In para 3 sub para (2) shall be omitted.
(ii) In para 12 sub para (1) the note shall be omitted.
(iii) In Form A (Some changes have been made in Application Form for opening new PPF A/c). —Manohar Lal
The changes referred to in your query are as a consequence of the discontinuance of the opening of an account under the Public Provident Fund Scheme 1968 by an HUF. Since you already have an account under the HUF status, these provisions would not apply to you as the amendments are not retrospective in operation. In case you want to continue with the account, it will be better to keep subscribing the minimum subscription amount of Rs 500.
I am a Central government employee. Can I include dearness allowance (DA) as part of the salary to avail House Rent Allowance (HRA) rebate? Some of my colleagues are insisting that there is a rule which exempt "DA" from the definition of salary for calculating the HRA rebate as DA is not included in the pensionary benefit for superannuation calculation. However, we are getting DA on retirement as a pensionary benefit. — Devender
Rule 2A of the Income Tax Rules, 1962, prescribes the limits for the exemption of house rent allowance. The said rule provides that for this purpose the salary shall have the meaning as specified in clause (h) of Rule 2 of part A of the Fourth Schedule to the Income Tax 1961 (the Act). According to Rule 2(h), salary includes dearness allowance if the terms of employment so provide, but excludes all other allowances and perquisites. You will have to, therefore, ascertain whether your terms of employment provide for the inclusion of dearness allowance as part of the salary. If so, you will be able to seek the exemption of house rent allowance on the salary inclusive of dearness allowance.
My father (76), my two sisters and one brother are having an HUF firm. What factors should my father consider while writing his Will with respect to an HUF firm? — Jatinder
According to provisions of the Hindu Succession Act, 1956, where a Hindu dies after the commencement of the Hindu Succession (Amendment) Act, 2005, his interest in the property of a joint Hindu family governed by the Mitakshara law, shall devolve by testamentary or intestate succession, as the case may be, and not by survivorship, and the coparcenary property shall be deemed to have been divided as if a partition had taken place as on the date of the death. Hindus living in northern part of the country are governed by Mitakshara law. Reply to your query is therefore based on the presumption that you are governed by the law. According to the above provisions, a member of HUF which owns a joint family property can make a Will with regard to his interest in the HUF property. He cannot make any Will in respect of the shares of the other members of the family in the said property. In view thereof, your father has a right to make a Will in respect of his share in the HUF property in favour of any person of his choice. His share would be determined as on the date of the death because the share of any member is not ascertainable before the partition takes place. The remaining part of the property i.e. excluding his share would continue to vest with HUF. In my opinion, the best alternative available to your father is to divide the HUF property during his life time. Such a partition can be in unequal shares. Your sisters being coparceners according to the amended law, can be given higher or lower share in the partitioned HUF property. This would avoid any dispute between the coparceners after the death of your father.