Since two months I am receiving few requests to review the LIC Agent’s (but not from LIC of India) plan Retire and Enjoy. Finally one of my clients provided the plan presentation. I know I am late by reviewing this plan at the end ( as all existing plans are about to close).
But at the same time, I know that this is the peak period (from today to till 31st Dec 014-before closure of existing plans) to sale as much as possible. So I thought it may be helpful even if I review it now.
As I said above, this is the plan prepared by agents of LIC, but not from LIC of India. It is the bundle of an LIC plans with different maturity period. So by selling a single Retire and Enjoy, an agent may complete his/her yearly minimum business requirement. But what about the person who bought this plan for his retirement?
Let us first list down the things we need to consider before planning for retirement.
1) Current Age-This is a most important factor. If you are younger, you have plenty of work life still pending. But at the same time if you are older, a lesser working life and about to start your retirement.
2) How long you want to work-It is required, as this the phase which also called the accumulation period for your retirement goal.
3) Current monthly expenses-This is the base on which we can inflate the expenses to arrive at how much you need for the first month of your retirement.
4) Annual expenses-Apart from regular monthly expenses we also have few annual expenses which we also need to consider to arrive at retirement corpus.
5) Expected inflation upto retirement-This will be required to arrive at how today’s expenses will be at your retirement.
6) Expected inflation during retirement-As this period is distribution period, it requires to adjust your outflow during your retirement period.
7) Expenses which you want to add or delete during the retirement phase-Few of your current lifestyle expenses may not be there during retirement but at the same time few expenses may add up like health expenses.
8) Current investment you preserved for retirement-This will lower your future investment requirement for retirement goal.
9) Pre and Post Retirement investment returns-This will indicate like what type of investor you are and how much you are expecting to generate from retirement investment.
10) What type investor you are-This actually can be judged by your investment style, how much you are comfortable with each asset class and what type of risk you can take in the future.
Below are the few screen shots for your reference where I hid the buyer as well as agent’s details.
A) You notice that in below image, the age of a buyer is 42 years and yearly premium quoting as Rs.1, 27,516 also they showing tax benefits if you are under highest tax bracket.
B) In below image, you notice the retirement benefit you receive.
C) I don’t know what the benefit agent is illustrating post-retirement 🙂 Is there any life insurance requirement during post-retirement? May be he is illustrating the benefit of death claim one receive under Jeevan Anand.
D) Below is the number of plans he will sell you in one shot with this magic plan.
Above listed points are commonly used factors to arrive at one’s retirement planning. The list may prolong based on client profile. Now coming back to this plan. Below is the list of advantages of this plan.
1) This is the bundle of a plan like bundle of Endomwnet plan or Jeevan Anand.
2) Number of plans will go on increase based on your life expectancy in post-retirement. Suppose your retirement age is 60 years and you are planning to have retirement income till 70 years then 10 numbers of either endowment plans or Jeevan Anand Plans 🙂
3) The basic thing here is, suppose you are 30 years old and planning to retire at 60 years and your expectation of income post retirement will be 10 years, then your agent will design you the plan in such a way that plan 149 term 30 years, 31 years, 32 years and so on till maturity equal to 70 years.
4) What they may show you is the benefit of Sec80C. The premium range will vary from Rs.1,00,000 to Rs.1,50,000 yearly. However, there are many options to fill the gap of Sec.80C easily like EPF, Term Insurance, PPF or home loan. So featuring this as the only plan, which give you the best benefit of Sec80C will be foolish.
5) If you need Rs.4,00,000 at the age of 60 years, then your agent will issue one policy with around SA Rs.2,00,000 so that you get yearly retirement (maturity amount) of Rs.4,00,000. But he will actually forget to say that what will be the value of Rs.4,00,000 in that year.
6) This plan completely neglects the effect of inflation. Currently, the value of Rs.4, 00,000 may seem a good amount. But down the line, after 30 years with the kind of inflation of around 6%, will it be the same value as of today? He will not explain to you.
7) Let us say inflation @ 6% and your retirement age will be around 30 years from now. So Rs.4, 00,000 you receive from that plan is Rs.69, 644 in today’s term. So decide today whether you survive with Rs.69, 644 a year or not then go for buying.
8) It is the traditional plan and in all probability return from such plan will hover around 7%. Then how one can beat the inflation rate of 6%? (A moderate consideration of inflation rate, but when you retire it may be more).
9) The agent may be forcing you to buy stating that the current plans will not be available after Dec 31st 2013. But in reality you will get a more beneficial product rather than these.
10) Finally, it not answers to retirement solution, which one need to consider while calculating the retirement corpus. Instead, it only calculates how much is a current surplus in your pocket to buy this product.
Hope I gave the valid points. Let us discuss further if someone already invested.
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Have you received that copy? Anu further comments?
Dear Hemant,
No.
Hi,
I enrolled into LIC magic plan way back in 2013 due to insistence of one my family friend and also I had no clue back then regarding investment. The plan was like 60,000 yearly and after 25 years I would get 4 lakhs yearly till 75 years. In total there are 23 plans in that bundle with varying premiums and SA, so from my 52nd policy anniversary I will start getting 4 LPA till 75th anniversary. But going through this article I started digging up as to what is my plan details as you stated that there is no magic plan as such. So my plan is the "endowment assurance policy (plan-14)" and SA is 155000 for one of them. I have so many questions like will I get the SA plus the four lakhs after the first policy is matured and the cycle will continue till the last of the 20 policies is matured
Also I can see that investing in endowment policy was a mistake but do you think exiting now would make sense given the market scenario.
Dear Shiva,
Better to surrender.
Hi
I bought the Magic Plan in 2013.After reading your views about the plan,i wish to stop paying the premium amount as I do not see any benefit.
How do I surrender this plan as my agent is not cooperating.
Thanks
Dear Heena,
Directly visit the home branch.
Why do you go for such plans. I can suggest a good plan for investment and protection.
I you can invest one lack per year for 15 years,
You will get 15,000 per month for ten years (ie. 15,500 x 12 x 10 = 18,50,000) from 16th year onwords. at the end of 25th year, you will get 17 L extra on maturity. (ie. a total of 35 Lakhs).
If something happens in between, you will get 18L and the policy will continue and the living benefit will receive by the nominee. If you can invest 1800 extra, you will have an accident death benefit of 18L. Thus there is a protection of 71 Lakhs.
Paul-Wooooooooow...So what is the return on investment?
Mr. Basavaraj,
Return of investment is Rs. 15,500 per month fo r 10 years and at the end of 10th year 17 Lakhs.
A total of 35 laks
Paul.
Please call me in 9895705143 for more details.
hi
can you please suggest me a lic magic plan ? please send me the detailed computation.
Nand-After reading above post, do you still feel the urge to invest in such dumb products?
I HAVE LIC PLAN NEW BHIMA GOLD AND JEEVAN SARAL AND PLANS ARE CLOSED NOW BY LIC.. AND THERE ARE NO EXISTING PALNS OF THESE.. WHAT WILL BE THE FUTURE OF THESE PLANS... ARE THEY GOOD PLANS.. AND I AM PAYIMG A PREMIUM OF 48225 AND 72060 TOWARDS EACH POLICIES.. CLARIFY ME IN THIS MATTER... THANK YOU
It is OK no problem. It is very good plan. It's not affected your future. what LIC approach, its already have the return. if any clarification contact me in 9380898983
Stella-In what way it is NO PROBLEM? Can you defend how this is VERY GOOD PLAN?
Muni-Why you bought these plans?
Hi Sir,
i have taken already Retire and enjoy plan in 2009 and premium is 555330 and continuously paying premium till date and 7 years completed and if i surrender the policy now how much i will get now?
i am waiting for reply
thanks in advance!
Sunil-This information you will get it from LIC branch.
Thanks for the reply!!! Could you please let me know the Best life term plan!
thanks in advance!
Sunil-Refer my post "Top 5 Best Online Term Insurance Plans in India-2016".
Dear Sir,
I, age 22, have he so called LIC- magic plan retire and enjoy, and I read your post about the same but it was too late. I have already paid 3 yearly premiums of Rs 108,813/- each and after reading your article I am totally lost on what to do with the almost 3.26lakhs that I have paid till date.
I looked at my options and could find 2 possible resolutions.
A) Surrender - This option will pay me around Rs 70,000/- (@30% the total amount of premium paid for two years)
B) Paid-Up - With this option I stop making the premium payments and the first of my policies is set to expire in the year 2054 which will give me an amount of around Rs 26,000/-. And similar amounts are expected from the rest of the "Jeevan Anands" per year.
I am devastated learning that I'll be losing my money the either way I choose. I just request you to give me a suggestion on the option that I should opt for which could be more beneficial than the other.
I know you must receive many such emails each day, so any help that you can provide would be greatly appreciated.
Regards,
Vedang Vadalkar.
Vedang-Hardest truth is to close it immediately (even though blood boils with the loss).
Mr. B. Tonagatti, i received a policy from Lici under table & term-122- 15, which is guaranteed pension scheme. Please not give such false statement. Which is totally unacceptable.
Swajan-Why you are comparing old endowment type Jeevan Suraksha plan with these agent's own creation of Magic Plan? Is anything guaranteed in this plan? Also, do you know the return of your Table and Term 122-15 plan? Blind investing is most dangerous than NOT INVESTING.
Hi Basav,
My name is Niyas, I have taken this plan in the year 2011 & I was 25 years old at the time. I pay a premium of 105000 on a yearly basis. I have to pay for 20 years (until 2030), by the time I would have paid 2100000. It has mentioned about returns effective from 2031 (age 46) onwards, it starts from 216755 onwards & increases at 5% per annum. Other rules remains the same as discussed above by you. The returns continues still 2059 (age 74) and then stops for 4 years. In 2065 it is mentioned for a return of 1995000.
This plan was sold to my dad by a known agent. Now I had taken all over on all my investment, am not an A/C person, so please advice me if this "Magic Plan" will help me by any chance, considering all the inflation facts.
Niyas-I already explained the drawback of this plan.