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Retirement Funds
Average returns - Dynamic- Number of funds - (Static)
What are retirement-oriented mutual funds?
A retirement mutual fund is a solution-oriented investment scheme which allows you to save up for your golden years. It has a lock-in period of 5 years or till you retire, whichever is earlier.
Advantages of retirement mutual funds
Disciplined investment
With a lock-in period of 5 years, you can save up for retirement and build a corpus over the investment tenure.
Market Linked returns
With equity-oriented retirement funds, you can expect to earn returns on investments which are also inflation-adjusted.
Tax benefits
Investment in Retirement mutual fund qualify for a deduction under Section 80CCC up to Rs.1.5 lakhs.
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Table of Contents
What are retirement funds?
Retirement funds are solution-oriented mutual funds which aim to create a corpus for retirement. They have a lock-in period which allow you to save in a disciplined manner.
What are the features of retirement funds?
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Lock-in of 5 years or till retirement, whichever is earlier
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SIP or lump sum investment
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Payout in lump sum or through regular income
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Tax benefit on invested amount
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Asset allocation in equity and debt securities
What should you know before investing in retirement funds?
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There’s a lock-in period which restricts liquidity in the initial investment years
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You can choose from debt-oriented or equity-oriented funds based on your risk profile
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There’s a Systematic Withdrawal Plan (SWP) which gives regular annuities from the accumulated fund
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If you invest in equity-oriented funds, invest with a long-term view to ride out short-term volatility.
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There might be an exit load on redemption
Who should invest in retirement funds?
Those who want regular incomes after retirement
Investors looking to diversify their portfolio
Individuals looking for tax-saving benefits from investments
Who should buy a Savings Plan?
Equity-oriented funds
• Returns up to Rs.1 lakh are tax-free
• Returns exceeding Rs.1 lakh are taxed at 10%
Debt-oriented funds
• Returns earned are taxed at income tax slab rates
How can you withdraw from retirement funds?
Lump sum
• Withdraw in a lump sum once the lock-in period is over
SWP
• Choose the Systematic Withdrawal Plan and withdraw a fixed amount every month or week from the investment to create a regular source of income. The invested amount keeps on growing.
Invest and secure with ULIPs
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Market-linked returns
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Flexibility: withdraw, switch, top up
Guaranteed returns, liquid trading
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Diverse bond types
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Stable portfolio returns
FAQs On Retirement Funds
A retirement fund, also referred to as a pension fund, is an investment vehicle designed for individuals to systematically save a portion of their income to secure financial stability during retirement. These funds provide a consistent income stream in the form of an annuity throughout the retiree's lifetime.
Managed on behalf of the investor, pension funds invest in a diversified portfolio, typically favoring low-risk options such as government securities to ensure stable returns. The generated income from these investments contributes to the interest provided on the pooled funds. Equity oriented fund invest in equity product which may result to higher growth but may come with volatility in short term
The fundamental purpose of a retirement mutual fund is to create a retirement corpus for your old age. With targeted maturity, you can save regularly and create a corpus for financial needs after retirement.
Retirement funds serve as a financial resource for meeting daily needs and unexpected expenses. They are particularly well-suited for individuals seeking assured returns in their senior years.
Planning your retirement early in life certainly has its advantages, some advantages of investing in a retirement fund are:
Financial Security for Emergencies: Retirement planning ensures a substantial corpus, providing a safety net for unforeseen financial crises in post-employment years.
Optimized Returns on Investments: Investing in retirement plans allows for savings growth over time, optimizing returns through strategic planning.
Tax Benefits: Retirement plans offer tax advantages, reducing taxable income and enabling effective management of investment expenses within legal frameworks.
Cost Savings Through Early Planning: Initiating retirement planning at a younger age leverages lower premium rates and reduces long-term investment costs.
Peace of Mind and Financial Independence: Retirement planning instills confidence and financial independence, offering a sense of security during various life stages.
If you consider healthcare costs when making investment decisions, you can tailor the investment amount accordingly. The returns from the investment will be sufficient for future medical expenses.
Other asset class funds
Debt Funds
Invest in debt securities for low risks and stable returns.
Fund of Funds
Mutual funds that invest in other mutual funds both in India and globally
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Hybrid Funds
Get a mix of equity, debt and other asset classes for a diversified portfolio
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ETF Funds
Invest in funds listed and traded on the stock exchange
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Index Fund
Passively-managed mutual funds tracking a particular index
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