Ritesh, a 30-year-old marketing professional, is happily married with two children. He is known for staying two steps ahead of his peers, be it personal or professional life. He recently purchased a Unit-linked Investment Plan (ULIP), which would not only provide financial protection to his family in the case of an unfortunate eventuality, but also provide returns on a part of the premium. He knew that investment in ULIP was best suited for long-term expenses like building a retirement corpus. Many individuals often grapple with the question: Is ULIP good for long-term? The answer is, yes. Like Ritesh, one can invest in a ULIP to plan for the golden years of life post

One needs to start planning for retirement as early as possible, because of the increased cost of living in the future, especially in post-retirement years.

Here is a list of five expenses that an individual might have to incur by 2050:

  1. Healthcare: According to the recent demographic trends, India is posed to see its ageing population being doubled by 2040. (1) With an ageing population, there can be a shortage in healthcare facilities for the elderly. Besides, various estimates suggest that an elderly individual needs to spend at least 15% of the total income on healthcare expenses. So an individual needs to have a sound financial plan for meeting healthcare expenditures in the post-retirement years.
  2. Child’s marriage/education: By 2050 one may have to incur significant expenditure like those incurred in meeting the cost of providing foreign education to the child, or the expenses in marriage. Any individual requires planning for these expenditures as part of the future financial goals.
  3. Leisure and Travel: After slogging for decades, one expects to spend quality time with the spouse or family in the post-retirement years. One might take up a new hobby, or travel frequently with the spouse and children. These leisure activities could result in a significant expenditure.
  4. Expenses on housing: By 2050 one might incur significant expenditure on additional housing costs while relocating to a preferred city. If one has an existing house, there could be costs on maintenance or renovation. Housing costs represent the highest share of spending by all age groups, and one must plan for it for the post-retirement years.
  5. Miscellaneous expenses: One needs to prepare for miscellaneous costs like those involved in providing healthcare facilities to the spouse, or any other, sudden unaccounted expenditure. Besides, there could be a significant increase in the cost of living because of inflation. Miscellaneous expenditures could increase in the post-retirement years, and one requires to account for them in the financial plan for retirement.

Is ULIP Good for Long-Term Expenditures?

With the rise in life expectancy, the non-earning period of an individual’s life also expands. So it becomes imperative to plan for retirement early. ULIPs invest in debt funds, equity funds or a mix of both, known as balanced funds. One of the biggest advantages of a ULIP is that it’s structured for goal-based planning. This means that investors can systematically invest in a ULIP plan with the aim of fulfilling specific financial goals. The five year lock-in period ensures investor discipline, where they must make regular premium payments to keep the policy active, thus allowing for systematic creation of wealth for the desired financial goals.

How to take advantage of ULIPs for long-term expenditure?

ULIPs come with the key feature of fund switching between debt and equity funds. Depending upon an investor’s risk appetite, which is simply the magnitude of risk any individual is willing to take in the market, along with the long-term financial goals, one can invest either in debt or equity funds or a portfolio with a combination of both debt and equity funds. Market experts suggest that, over a long-term period, investors could take more risks by earlier investing in an equity fund, and then shift to debt funds in the face of approaching maturity. Also known as ‘Years to Maturity’ based portfolio management, one can take advantage of this feature to build a retirement corpus for post-retirement years.

Conclusion: The answer to ‘Is ULIP good for long-term?’ is yes. One can easily plan for post-retirement years by investing in ULIP plans. This is ideal for an individual’s retirement planning and other long-term financial goals. To find goo