SBIL Retire Smart policy: What benefits and surrender options do I have?

I had taken SBIL Retire Smart policy for 10 lakhs with a premium of 2 lakhs every year. The policy has take on 30th August 2019. Now it is matured. What benefit I get now and can I surrender it now? If I surrender it , How much amount I get?

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.

Asked on - Sep 21, 2024 | Answered on Sep 21, 2024

I can not take the full amount? What means tenure. When I have taken the policy, the reliable source informed me that after 5 years any time I take the money fully with @ 8.5 percent. Please explain

Ans: I have informed you policy details as available on the sbi life insurance website. For exact interpretation of your policy agreement terms and conditions you may kindly approach your insurance advisor.

Ans: I appreciate your discipline in saving Rs. 2 lakh each year. It is not simple to commit for five years. Many people do not have this consistency. Your accumulated corpus of Rs. 14.09 lakh is commendable. Patience and regular investment are both priceless.

» Withdrawal Possibility After Ten Years
The withdrawable percentage from a retirement insurance policy is not fixed for all. In most cases, policy terms permit a partial withdrawal on maturity—about 33% to 60% of the accumulated corpus. The actual withdrawal ratio depends on your age, current pension rules, plan features, and changes made by the insurer or government authorities.

Most insurance retirement plans allow withdrawal of up to 1/3rd as a lump sum after ten years.

Sometimes, a higher partial withdrawal up to 60% is permitted based on latest regulatory updates.

The withdrawn portion is tax-free. The rest is used for pension generation.

Always check with the insurance company regarding current withdrawal percentages. Rules and benefits may change over time.

Consider your retirement needs carefully before choosing withdrawal vs. pension option.

You may take help of a Certified Financial Planner to optimise withdrawals.

» How Much Monthly Pension Can You Get After Ten Years
The pension generated relies on corpus size, annuity/pension rate, age, and plan features.

If you do not withdraw the corpus, the insurer converts the entire amount into pension.

The monthly pension will depend on plan rates applicable after ten years.

Usually, monthly pension is calculated on prevailing annuity or interest rates at maturity.

The higher the corpus, the higher the monthly payout.

However, pension rates can change due to inflation and policy rules.

Even if insurance plans guarantee returns, rates can be reviewed periodically by the insurer.

A Certified Financial Planner can help estimate future pension based on current rates and updated corpus value.

Plan for longevity and rising expenses so that your pension benefits remain sufficient.

Use conservative assumptions for monthly pension calculation.

» Detailed Insight: Withdrawal and Pension Calculation Factors

Withdrawal percentage (lump sum or commuted value) is mostly capped by IRDA norms.

Pension rates are influenced by interest rates and scheme rules.

The pension amount will be lower if more is withdrawn as lump sum.

Inflation may reduce real value of future pension.

No annuity product is perfect. Assess your risk, age, and goals.

Request a retirement illustration from your insurer yearly before the tenth year.

Balance between immediate lump sum needs and regular income requirements.

Revisit your plan every year till maturity with a Certified Financial Planner.

Ask for a policy schedule to check withdrawal and vesting rule updates.

This helps you remain prepared for retirement.

» Additional Considerations: Policy Changes and Regulatory Updates

Insurers sometimes alter withdrawal clauses based on regulator instructions.

Percentage allowed for withdrawal is not fixed; expect 33% to 60% range.

Changes in maturity rules will affect the timing and amount of your withdrawal.

Stay updated on policy announcements from your insurer.

Keep all policy documents and correspondences safely.

Policy features can differ between traditional and market-linked plans.

Seek updated written communication for clarity.

» Taxation of Retirement Policy Withdrawals

Lump sum withdrawal on maturity is often tax-free.

Monthly pension (annuity) is taxable as per your income slab.

Remember to factor in post-retirement tax obligations.

You may plan tax-efficient withdrawals with a Certified Financial Planner.

Planning helps keep more in hand during retirement.

Retirement plan tax rules can change; stay updated.

» Smart Steps for Retirement Security

Start by estimating your post-retirement monthly expenses.

If you have additional sources of income, calculate total pension needs.

Consider inflation and health costs before deciding withdrawal vs. pension.

Explore rebalancing of retirement corpus based on future goals.

Use insurance policy statements, annual fund reports, and retirement calculators for planning.

Do not rely only on verbal communication from insurer staff.

Written, official information is most reliable.

» Evaluating the Policy Performance

Your current corpus of Rs. 14.09 lakh means you earned returns over time.

The policy’s growth can be checked against other retirement savings options.

Compare projected pension amount with alternate retirement plans.

Try to keep expectations realistic for returns and withdrawal limits.

Past returns do not guarantee future performance.

Your risk profile, age, and retirement date are essential for right decisions.

Update your plan as your circumstances change.

» Options in Case of Policy Surrender

Surrender is possible if policy rules permit.

Surrendering may result in less payout than maturity benefits.

Charges and penalties can reduce the corpus upon surrender.

Consider all pros and cons before surrendering retirement insurance plans.

Switching from insurance policy to investment plans is not always advisable.

Review before making major changes in your retirement strategy.

» How to Optimise Your Retirement Corpus

Balance between lump sum withdrawal and regular pension.

Consider keeping the corpus invested for a few more years for higher growth if allowed.

Diversify your retirement savings using multiple products.

Make family members aware of your policy terms in case of future need.

Maintain regular communication with your insurer for service and records.

Take guidance from a Certified Financial Planner for a 360-degree approach.

» Practical Tips for Your Retirement Journey

Regularly check your policy statement and projected maturity values.

Review retirement needs and pension adequacy every year.

Policy features, withdrawal limits, and pension rates change; stay informed.

Request a retirement benefit illustration annually from your insurer.

Never rely solely on past experience of others.

Your policy’s terms and maturity values can differ from others.

Stay firm in your systematic investment habit for continued financial security.

» Possible Pension Calculation Example (Hypothetical)
Suppose your Rs. 14.09 lakh remains invested till year ten. If policy allows withdrawal of 33%, then Rs. 4.64 lakh may be withdrawn as lump sum. The remaining Rs. 9.45 lakh will generate monthly pension. If future annuity rates are say 6%, estimated monthly pension could be around Rs. 4,725. If higher withdrawal like 60% is permitted, lump sum can be Rs. 8.45 lakh, rest generates lesser pension. These figures will be confirmed after policy anniversary nearer maturity.

» What To Do Next

Check exact withdrawal and pension percentages with insurer before policy matures.

Collect all written policy updates and maturity projections from the insurance provider.

Take support from a Certified Financial Planner for detailed retirement cash flow plans.

Continue developing your retirement savings habit.

Revisit your policy at regular intervals before the tenth year.

» Final Insights
Your consistent investments will always reward your retirement goals. Keep track of your policy terms and maturity options every year. The right decision at maturity will assure lifelong financial comfort. Stay aware, stay invested, and keep nurturing your retirement corpus.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: You have built a strong base. You have raised your sons well. They live independently. You and your wife now want a peaceful and enjoyable retired life. You have created wealth with discipline. You have no home loan. You live in your own house. This gives strength to your cash flow. Your savings across equity, mutual funds, and bank deposits show good clarity. I appreciate your careful preparation. You deserve a happy retired life with travel and comfort.

» Your Present Position
Your current financial position looks very steady. You hold direct equity of around Rs 2.5 Cr. You hold equity mutual funds worth Rs 50 lakh. You also have Rs 50 lakh in bank deposits and other secured savings. Your two rental properties add more comfort. You earn around Rs 40,000 per month from rent. You also live in your owned house in Delhi NCR. So you have no rent expense.

Your total net worth crosses Rs 5.5 Cr easily. This gives you a strong base for your retired life. You plan to spend around Rs 24 lakh per year for all expenses, including travel. This is reasonable for your lifestyle. Your savings can support this if planned well. You have built more than the minimum needed for a comfortable retired life.

» Your Key Strengths
You already enjoy many strengths. These strengths hold your plan together.

You have zero housing loan.

You have stable rental income.

You have children living independently.

You have a balanced mix of assets.

You have built wealth with discipline.

You have clear goals for travel and lifestyle.

You have strong liquidity with Rs 50 lakh in bank and secured savings.

These strengths reduce risk. They support a smooth retired life with less stress. They also help you handle inflation and medical costs better.

» Your Cash Flow Needs
Your yearly expense is around Rs 24 lakh. This includes travel, which is your main dream for retired life. A couple at your stage can keep this lifestyle if the cash flow is planned well. You need cash flow clarity for the next 30 years. Retirement at 56 can extend for three decades. So your wealth must support you for a long period.

Your rental income gives you around Rs 4.8 lakh per year. This covers almost 20% of your yearly spending. This reduces pressure on your investments. The rest can come from a planned withdrawal strategy from your financial assets.

You also have Rs 50 lakh in bank deposits. This acts as liquidity buffer. You can use this buffer for short-term and medium-term needs. You also have equity exposure. This can support long-term growth.

» Risk Capacity and Risk Need
Your risk capacity is moderate to high. This is because:

You own your home.

You have rental income.

Your children are financially independent.

You have large accumulated assets.

You have enough liquidity in bank deposits.

Your risk need is also moderate. You need growth because inflation will rise. Travel costs will rise. Medical costs will increase. Your lifestyle will change with age. Your equity portion helps you beat inflation. But your equity exposure must be managed well. You should avoid sudden large withdrawals from equity at the wrong time.

Your stability allows you to keep some portion in equity even during retired life. But you should avoid excessive risk through direct equity. Direct equity carries concentration risk. A balanced mix of high-quality mutual funds is safer in retired life.

» Direct Equity Risk in Retired Life
You hold around Rs 2.5 Cr in direct equity. This brings some concerns. Direct equity needs frequent tracking. It needs research. It carries single-stock risk. One mistake may reduce your capital. In retired life, you need stability, clarity, and lower volatility.

Direct funds inside mutual funds also bring challenges. Direct funds lack personalised support. Regular plans through a Mutual Fund Distributor with a Certified Financial Planner bring guidance and strategy. Regular funds also support better tracking and behaviour management in volatile markets. In retired life, proper handholding improves long-term stability.

Many people think direct funds save cost. But the value of advisory support through a CFP gives higher net gains over long periods. Direct plans also create more confusion in asset allocation for retirees.

» Mutual Funds as a Core Support
Actively managed mutual funds remain a strong pillar. They bring professional management and risk controls. They handle market cycles better than index funds. Index funds follow the market blindly. They do not help in volatile phases. They also offer no risk protection. They cannot manage quality of stocks.

Actively managed funds deliver better selection and risk handling. A retiree benefits from such active strategy. You should avoid index funds for a long retirement plan. You should prefer strong active funds under a disciplined review with a CFP-led MFD support.

» Why Regular Plans Work Better for Retirees
Direct plans give no guidance. Retired investors often face emotional decisions. Some panic during market fall. Some withdraw heavily during market rise. This harms wealth. Regular plan under a CFP-led MFD gives a relationship. It offers disciplined rebalancing. It improves long-term returns. It protects wealth from poor behaviour.

For retirees, the difference is huge. So shifting to regular plans for the mutual fund portion will help long-term stability.

» Your Withdrawal Strategy
A planned withdrawal strategy is key for your case. You should create three layers.

Short-Term Bucket
This comes from your bank deposits. This should hold at least 18 to 24 months of expenses. You already have Rs 50 lakh. This is enough to hold your short-term cash needs. You can use this for household costs and some travel. This avoids panic selling of equity during market downturn.

Medium-Term Bucket
This bucket can stay partly in low-volatility debt funds and partly in hybrid options. This should cover your next 5 to 7 years. This helps smoothen withdrawals. It gives regular cash flow. It reduces market shocks.

Long-Term Bucket
This can stay in high-quality equity mutual funds. This bucket helps beat inflation. This bucket helps fund your travel dreams in later years. This bucket also builds buffer for medical needs.

This three-bucket strategy protects your lifestyle. It also keeps discipline and clarity.

» Handling Property and Rental Income
Your properties give Rs 40,000 monthly rental. This helps your cash flow. You should maintain the property well. You should keep some funds aside for repairs. Do not depend fully on rental growth. Rental yields remain low. But your rental income reduces pressure on your investments. So keep the rental income as a steady support, not a primary source.

You should not plan more real estate purchase. Real estate brings low returns and poor liquidity. You already own enough. Holding more can hurt flexibility in retired life.

» Planning for Medical Costs
Medical costs rise faster than inflation. You and your wife need strong health coverage. You should maintain a reliable health insurance. You should also keep a medical fund from your bank deposits. You may keep around 3 to 4 lakh per year as a buffer for medical needs. Your bank savings support this.

Health coverage reduces stress on your long-term wealth. It also avoids large withdrawals from your growth assets.

» Travel Planning
Travel is your main dream now. You can plan your travel using your short-term and medium-term buckets. You can take funds annually from your liquidity bucket. You can avoid touching long-term equity assets for travel. This approach keeps your wealth stable.

You should plan travel for the next five years with a budget. You should adjust your travel based on markets and health. Do not use entire gains of equity for travel. Keep travel budget fixed. Add small adjustments only when needed.

» Inflation and Lifestyle Stability
Inflation will impact lifestyle. At Rs 24 lakh per year today, the cost may double in 12 to 14 years. Your equity exposure helps you beat this. But you need careful rebalancing. You also need disciplined review with a CFP-led MFD. This will help you manage inflation and maintain comfort.

Your lifestyle is stable because your children live independently. So your cash flow demand stays predictable. This makes your plan sustainable.

» Longevity Risk
Retirement at 56 means you may live till 85 or 90. Your plan should cover long years. Your total net worth of around Rs 5.5 Cr to Rs 6 Cr can support this. But you need a proper drawdown strategy. Avoid high withdrawals in early years. Keep your travel budget steady.

Do not depend on one asset class. A mix of debt and equity gives comfort. Keep your bank deposits as cushion.

» Succession and Estate Planning
Since you have two sons who are settled, you can plan a clear will. Clear distribution avoids conflict. You can also assign nominees across accounts. You can also review your legal papers. This gives peace to you and your family.

» Summary of Your Retirement Readiness
Based on your assets and cash flow, you are ready to retire. You have enough wealth. You have enough liquidity. You have enough income support from rent. You also have good asset mix. With proper planning, your lifestyle is comfortable.

You can retire now. But maintain a disciplined withdrawal strategy. Shift more reliance from direct equity into professionally managed mutual funds under regular plans. Keep your liquidity strong. Review once every year with a CFP.

Your wealth can support your travel dreams for many years. You can enjoy retired life with confidence.

» Finally
Your preparation is strong. Your intentions are clear. Your lifestyle needs are reasonable. Your assets support your dreams. With a balanced plan, steady review, and mindful spending, you can enjoy a comfortable retired life with your wife. You can travel the world without fear of running out of money. You deserve this peace and joy.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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