Last Updated:November 25, 2024, 16:13 IST

Waiting until the last minute often leads to rushed decisions, which may not align with your long-term goals.

One of the most significant factors for making investment decisions for most Indians is tax planning. (Representative image)

We are nearing the end of 2024 soon, which is a good time to reflect on the year gone by. It’s the time to reflect on our choices – Did we do all we could to make our year great, but also ensure that our future also benefits from the actions that we took this year? This stands as true for our financial decisions as it is for our ones.

The turn of year is of course a time for celebration, but it is also a time for new resolutions. It is also an important checkpoint to review our financial planning. And since there are still a few months left for the financial year to conclude, the turn of the calendar year is also a great opportunity to take stock of your finances and plug the gaps, if any. This could be from the angle of tax planning, or the perspective of retirement planning and achieving your financial goals.

However, with so many investment options available in the market, it can sometimes be difficult to decide where to start and where to invest. So we have put together a step-by-step guide to help you make smart, end-of-year financial decisions.

Tax Saving and Creating Wealth

One of the most significant factors for making investment decisions for most Indians is tax planning. Miss this window and you may end up paying a lot more in taxes than you have to. The other factor is creating an adequate corpus to ensure you are not dependent on anyone during your retirement years. Then there are certain investment essentials that you need to ensure your financial plans are never derailed even in an emergency.

Let’s take a look at how you can achieve all these three goals.

Term Insurance: Term insurance has rightly been deemed the foundation of all financial planning. While you may have investments that offer returns, nothing beats the safety shield of a pure-term plan. These plans are among the simplest but most impactful investments you can make. The size of the insurance cover term plans offered is significantly higher at a very affordable premium. Of course, tax saving is yet another reason to go for it. These plans offer tax benefits of up to Rs 150,000 for premiums paid under Section 80C. Even if you have other kinds of insurance plans that offer life cover, don’t forget to opt for term insurance. You can also add riders to these plans to further enhance your policy’s utility.

Guaranteed Return Plans: If you are looking for investments that involve no amount of risk, then guaranteed return plans stand out as a great option. These long-term plans provide fixed returns of up to 7% completely insulated from the fluctuations of the market. The great news is that many of these guaranteed return plans offer dual benefits of guaranteed returns along with the added shield of life insurance. So if the policyholder passes away during the policy term, the insurance component of the plan kicks in to safeguard the family. They get a lump-sum payment to cover their expenses and achieve their financial goals. So while you can build wealth systematically over time, your family is protected as well for an unforeseen eventuality.

These plans also come with flexible tenure options with tenures as short as five years. Or you can lock in the rate of return for as long as 30 years. The certainty of getting a fixed and high return over 30 years can offer financial security that no other instrument can. The cherry on this cake is that the returns under these plans are tax-free. Moreover, you can claim tax deductions on the premium that you pay under Section 80C, making them a prudent investment choice.

ULIP: If you are not certain and are willing to take more risks, then ULIPs, or Unit Linked Insurance Plans, are ideal for you. These plans also offer the dual benefit of insurance and investment. These plans too come with tax benefits. The main difference is that the returns of these plans are market-linked. You can choose plans that invest in equities or debt. You may also choose balanced fund plans that offset some of the risk of the market with the certainty of bonds.

If the life goal is retirement, then there are these new-age ULIP Pension Plans which have emerged as an innovative tool for building a retirement corpus. These can be seen as a variant of ULIPs but designed specifically for retirement planning. Like ULIPs, these plans invest in a mix of equity and debt funds and also give you flexibility to adjust your portfolio according to your risk appetite and financial goals. The main difference is that once you retire, you can withdraw up to 60 per cent of your corpus while the remaining 40 per cent is invested in an annuity. This gives you a regular income stream after your retirement.

Many ULIP pension plans come with a “Pension Booster” feature, which refunds key charges like administration fees. This significantly increases your returns. Moreover, these plans allow partial withdrawals after five years for emergencies, making them a versatile choice for long-term retirement planning.

Health Insurance: You may have covered your family’s future in case of your death, but what if you or your family goes through a medical emergency? With the high cost of medical care, such an incident can also derail your financial goals. So it is a must to have a health insurance plan to insulate your financial future from such eventuality. A comprehensive health cover protects you from rising medical costs. It also gives you peace of mind during emergencies.

Additionally, premiums paid on health insurance policies are also eligible for tax benefits under Section 80D. You can claim deductions of up to Rs 75,000 if you’re also buying health insurance for your senior citizen parents.

The end of the year is not just a symbolic milestone but a practical deadline for making tax-saving investments and ensuring your financial portfolio is on track. Waiting until the last minute often leads to rushed decisions, which may not align with your long-term goals.

-The author is head of investment at Policybazaar. Views expressed are personal.

Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Readers are advised to check with certified experts before making any investment decisions.