Can I Withdraw My SBILIFE Retire Smart Plan After Five Years?

Ans: Thank you for your kind words. Considering the long-term perspective, it's better to stop paying more premiums to the SBI Retirement Smart Plan. While surrendering now might result in a Rs. 50k loss, it prevents further losses and allows you to reinvest the remaining funds in more profitable avenues like mutual funds. Booking a loss now is better than continuing and making further losses.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: If you surrender the policy now then assuming that by now your corpus might have grown to around 14 Lacs(approx) then you have two options:
1. Take monthly pension of around 6K per month for the tenure of your policy annuity period
2. Take 60% of your net fund value i.e. 60% of 14 Lac, so a sum of 8.4 Lac as lumpsum payout. And on the balance 5.6 Lacs you may receive pension of around 2.4K per month for the tenure of your policy annuity period.

Ans: If you surrender the policy now then assuming that by now your corpus might have grown to around 14 Lacs(approx) then you have two options:
1. Take monthly pension of around 6K per month for the tenure of your policy annuity period
2. Take 60% of your net fund value i.e. 60% of 14 Lac, so a sum of 8.4 Lac as lumpsum payout. And on the balance 5.6 Lacs you may receive pension of around 2.4K per month for the tenure of your policy annuity period.

If you keep the policy then your Fund Value will keep on growing till the vesting period(Not known)

After the vesting period is over you can buy annuity/pension for the entire fund value or 40% of Fund Value and withdraw 60% of Fund Value.

The annuity plan will be as subscribed by you during purchase of the policy.

Ans: Hello;

The details of this policy, as available on IRDAI website, do not mention about any lock-in period.

If you decide to surrender this policy now you may expect to receive 50% value of premiums paid by you minus discontinuation and other charges, as applicable.

Even at maturity you may expect only return of premiums paid after deducting taxes and extra premiums, if any.

But if you have this policy as a collateral against home loan then you should not surrender it till your home loan repayment is completed.

Best wishes;

Ans: The monthly pension payable depends on several factors. Let us evaluate these factors and assess the best approach for your financial security.

Key Factors Affecting Monthly Pension
Fund Value at Present: Rs 12,00,000 after five years.

Remaining Policy Term: Five more years to complete the total term of ten years.

Pension Calculation Basis: The pension amount will depend on how the fund performs in the next five years.

Withdrawal and Annuity Rules: Many insurance-based pension plans require a part of the corpus to be used for annuity purchase.

Investment Growth Possibility: If the fund remains invested for five more years, the value can increase.

Annuity Rate at Maturity: The monthly pension will be based on prevailing annuity rates at the time of vesting.

Potential Pension Payout
If the fund grows well, the pension amount will be higher.

If returns are lower, the pension amount will be less than expected.

Annuity rates fluctuate, affecting the final monthly payout.

Pension depends on life expectancy, as longer periods mean lower monthly payouts.

Evaluating Alternative Options
Investment-Linked Pension Plans: These often provide lower returns than mutual funds.

Mutual Funds for Higher Growth: Actively managed mutual funds have historically delivered better long-term returns.

Surrender and Reinvestment: If surrendering is allowed, reinvesting in mutual funds can be beneficial.

Flexibility of Mutual Funds: Mutual funds provide withdrawal flexibility, unlike annuities.

Taxation Impact on Pension
Annuity payments are taxable as per the income tax slab.

Mutual fund withdrawals are taxed based on capital gains rules.

Tax-free corpus from PPF can be considered for additional retirement income.

Final Insights
Insurance-based pension plans have limitations. Returns are lower than actively managed funds.

Annuity is rigid, whereas mutual funds allow flexible withdrawals.

Assess personal risk appetite before deciding on the final pension approach.

Consult a Certified Financial Planner for a tailored strategy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment