Using a ULIP to Plan Your Retirement


The period of retirement is considered to be the golden period of one’s life. One can finally let go of work pressures and other responsibilities to rest and focus on themselves. One of the most important ways to ensure a good post-retirement life is to plan your finances for those years in the right way. 

Out of the many investment options you can use in this scenario, one that stands out is a ULIP or a Unit-Linked Insurance Plan. It is a life insurance product that also offers varied investment opportunities as per your risk appetite. Here is how you can use a ULIP to plan efficiently for your retirement. 

How does a ULIP work?

To understand how ULIPs can benefit you in retirement planning, it is important to understand how they work. A ULIP premium is used by the insurance company in two ways. The insurer invests a chunk of the premium in the instruments of the policyholder’s choice. Another portion of the premium is used just like in other life insurance plans, that is to offer life insurance coverage to the policyholder. 

There are different types of ULIPs, such as equity ULIPs, debt ULIPs, hybrid ULIPs, and so on. The options and benefits available within the ULIP umbrella are perfect for a retirement plan. 

How to plan your retirement with ULIPs 

  • Pick the right ULIP 

The performance of a ULIP can be tracked and evaluated via various metrics, such as absolute returns and the CAGR. Before you finalise a ULIP, ensure to check the historical performance of the plan. You should also do the same with the asset class you are investing in. A thorough check should also be carried out on the insurer and their capability to handle your investment for the long term. 

  • Take advantage of fund switching option 

A ULIP is a unique investment plan not only because it merges life insurance and investment but also because it allows you to switch your funds from debt to equity and vice versa. Referred to as fund switching, this option helps you make the most of each asset class without having to pay for exit charges repeatedly. 

  • Choose a suitable portfolio strategy 

ULIP providers also have portfolio strategies suited for long-term goals, such as retirement, that use the fund-switching feature to maximise returns and minimise risk. 

For instance, in the wheel of life portfolio strategy, a majority of your investment is invested in equity instruments in the initial years of the plan. This may be a time when your willingness to take risks is high. However, as the years pass by, and one prefers stable returns over high risk, the money is transferred gradually to low-risk options. So, by the time you retire, your returns are safely parked in fixed-income debt instruments. 

  • Use the right tools 

One cannot predict how their investments will perform; however, one can use easily accessible tools, such as the ULIP return calculator or CAGR calculator. To be able to use these tools, you must have a certain amount and time in mind. You can then add these figures and receive estimates based on the information provided. A CAGR calculator, for instance, helps you understand the growth rate of an investment over the years. 

The ULIP return calculator, on the other hand, gives you an approximate idea of the returns you can expect when you invest a particular amount for a certain period in either asset class. You can use the growth rate provided by the CAGR calculator to get a more accurate estimate. The ULIP return calculator also helps you reach the right balance between premium and investment expectations. 

  • Supplement your life insurance coverage 

The period of retirement is also dotted with repeated visits to the hospital. Vulnerability to serious illnesses is at an all-time high at this age. Hence, one must select options, such as the critical illness insurance add-on or accidental disability add-on, with their ULIP life insurance coverage. These riders provide an additional compensation amount to the policyholder/beneficiaries if the covered situation occurs. 

With the help of the points mentioned above, you can draft a well-designed ULIP retirement plan that makes the most of ULIP features to give you a relaxed post-retirement lifestyle.