Why Is Diversifying Your Retirement Plans Crucial for Better Security?

Whether you plan to retire early or build a substantial retirement fund to lead a comfortable post-retirement life, you cannot achieve it without diversifying your investment portfolio. Diversification helps people spread their investments across multiple asset classes to prevent overexposure to market volatility. 

It also supports strengthening long-term financial security by optimising portfolio performance. While the Indian market provides numerous products across various asset classes, such as stocks, bonds, pension plans, real estate, etc., Life Insurance-based retirement plans emerge as a low-risk yet growth-centric option.

This blog discusses prioritising diversification in retirement planning to help you achieve your retirement goals faster.     

What is Diversification in Retirement Planning?

Diversification is one of the best risk-reduction methods you can integrate into your retirement planning. It requires careful assessment of your retirement goals and risk profile so you can distribute investments across multiple goal-aligned asset classes to limit your overall risk.

If you’ve already invested in high-risk market-linked investments, like stocks, real estate, etc., to build wealth for retirement, consider balancing the portfolio’s risk profile by including Life Insurance-backed retirement plans. 

You may explore the Shriram Life Assured Income Plan (UIN: 128N053V05), as this low-risk plan provides guaranteed income, Life Insurance coverage, and additional protection clubbed in one. This balanced diversification approach can help you enjoy financial protection, guaranteed returns, and disciplined savings for enhanced security.         

Benefits of Diversifying Your Retirement Portfolio

One of the biggest benefits of diversifying your retirement portfolio is risk mitigation. For instance, if your stock investments underperform due to market downturns or inflation, your investments in government-backed bonds, pensions, annuities, etc., can compensate to maintain the overall investment portfolio performance.   

Consider adding annuity plans like the Shriram Life Saral Pension (UIN: 128N092V01) plan in your portfolio if you want to receive predictable and steady post-retirement income, unchanged by external factors. You can also explore other non-linked Savings Plans and Investments Plans that create guaranteed income sources for your golden years. 

Strategies to Diversify Your Retirement Plans

Your diversification strategy should be based on your risk tolerance, financial goals, and current financial condition. People with a lower risk tolerance should invest more in safer options, such as government-backed bonds, non-linked Life Insurance plans, assured income options. 

The balance can be invested in a healthy mix of medium and high-risk options. Regardless of your risk profile, you should consider including insurance plans that complement other investments, such as the Shriram Life Early Cash Plan (UIN: 128N093V03). 

This plan provides a capital guarantee, life cover, steady return growth through the power of compounding, etc. However, we recommend consulting a professional financial advisor for personalised guidance.   

Risks of Not Diversifying Your Retirement Plans

Diversifying your investments is one of the best savings strategies for accumulating substantial retirement funds. If you concentrate most of your investments in one asset class, such as stocks or real estate, your portfolio performance can fall sharply during economic downturns. 

Over-reliance on one investment category can limit your growth potential, extending the duration needed to accomplish your retirement goals. If you’re looking for a more secure investment option that acts as a financial cushion during market volatility, you must include goal-aligned Life Insurance plans in your portfolio.   

How Insurance Products Contribute to Diversification?

Anyone in their retirement planning phase must view Life Insurance products as a critical diversification option. They add an additional security layer to your retirement portfolio by balancing risks associated with market-linked investments. 

Consider investing in non-linked Life Insurance plans that provide predictable income post-retirement and immediate tax benefits u/s 80C. At Shriram Life Insurance, we provide numerous tax-saving options that help achieve diverse retirement goals.     

Conclusion

Diversifying investments is the key to ensuring financial security and stability during retirement. Anyone wanting to create a steady and predictable post-retirement income source unaffected by market conditions should include Life Insurance-backed retirement plans in their portfolio. 

You can explore numerous diversification strategies that align with your financial goals but focus on keeping Life Insurance plans at the core of your investments for a secure and worry-free retirement. At Shriram Life Insurance, we provide numerous Life Insurance plans, ranging from Protection Plans to Child Plans, to fulfil diverse retirement goals.