Top Three Investment Options for Your Retirement Ahead

Written on Tuesday, August 8, 2017
By Mitali Sharma

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Retirement planning is a sensible and essential step that every working professional must take upon to retire wealthy. It's true that by the age of 60, you will most likely accomplish all your financial goals and thus will have fewer liabilities but that doesn't mean your need for financial security will minimise once you grow old. Post retirement, most likely, you won't have a regular source of income, your medical needs will increase, inflation will make things much costlier, you will feel an increased need of domestic help, convenience help, etc. So, having financial security will be as important at the age of 60 as it is at the age of 30. So, retire as rich as you can.


How to Retire Rich? Simple, Start Investing Early


Early you start investing, wealthier you can retire. With proper planning, not just you will be able to accumulate enough wealth to suffice your retirement needs but will also be able to pass on a considerable legacy to your family. Ideally you should start with your retirement planning, soon after 2-3 years of getting settled in a regular job. Early you will start investing for your retirement, more compounding time your money will get and thus will grow to its fullest. However, if you have yet not started your retirement investments, then also kick start it immediately. It is better to be late than never. So, in which ever life-stage you are in, whatever is your investment capacity, just START INVESTING for your Retirement. 


In this blog, you read about different retirement investment options available for investors.


1. NPS: New Pension System is a Govt. Of India initiative, regulated by PFRDA. It is a retirement solution offering market-linked returns. As a subscriber of this scheme, you are required to make regular monthly/annual investments towards your account. On attaining retirement, a portion ( 60% or 20%, depending on age of exit) from your retirement corpus can be withdrawn as a lump sum amount and from the remaining portion, you are obliged to buy an annuity from a PFRDA appointed Pension Fund Managers, who will be managing your fund and giving you a monthly payment in form of your pension.


NPS gives you the flexibility to choose any one of the following Pension Fund Managers, appointed by PFRDA. LIC Pension Fund, SBI Pension Fund, ICICI Prudential Pension, HDFC Pension Fund, UTI Retirement Solutions, Reliance Capital Pension and Kotak Pension Fund 


Tax Benefits Under NPS


a. Under section 80 C of Income tax, deduction on NPS can be claimed for investments up to Rs.1,50,000.


b. Under section 80CCD(1B) of Income tax, additional deduction over and above the limit of section 80 C can be claimed subject to overall ceiling of Rs. 50,000.


c. Under Section 80CCD(2) of Income tax, the employer's NPS contribution(towards the employee) up to 10% of salary, without any monetary limit is also deductible from taxable income in addition to mentioned earlier benefits.


2. SIP For Retirement: SIP or Systematic Investment Plan is another good option to create a wealthy corpus for your retirement goal. SIP is not a product, it is a route to invest in mutual funds at a disciplined and regular manner. Through SIP route, you can invest a pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.) into a selected Mutual Fund and get market-linked returns. What makes SIP an investment product of high-potential is its power of Rupee Cost Averaging that balances the market highs and lows.


Apart from this, it is very investor-friendly as well. To do a SIP, you don't Need To Time The Market because it is not important what time you enter the market, rather it is important how much time you are in the market. If you are investing for a long term, usually retirement related investments are for long term only, you are good to go with SIP. It will make you invest in a disciplined manner for your retirement and more over for equity related SIP, the capital gains after 1 year of investment are also tax-free.


3. EPF: Employee’s Provident Fund or EPF is also a popular and much-accepted retirement saving instrument in India. The rate of return for EPF is governed by Govt. Of India and it offers guaranteed returns. This makes it a safe investment option. EPF offers deduction up to 1.5 lakh limit under section 80C; interest from EPF is tax-free and withdrawal is also tax-free if there is continuous service of 5 years. Unlike NPS, EPF does not have any restrictions such as purchasing an annuity. Mostly, EPF is mandatory for working professionals, and it is advisable to stay invested in this scheme. Even in the case of a job change, instead of withdrawal, one should opt for EPF transfer. This would ensure that you reap the benefits of guaranteed returns along with the power of compounding.




When you are accumulating money for your retirement, there is one golden rule- Start Investing Early. Once you have decided to invest, the next tedious job is to select the right investment product. Here, you can benefit the most, if you maintain a mixed portfolio. If you are capable of investing Rs. 5000 per month in name of retirement, then instead of investing all in one product, you can invest some in EPF for security purpose, some in NPS for its benefits, some in SIP for high-potential returns. However, the need for retirement planning continues even after your retirement. So, even in your post-retirement life, you need to make investments and get the senior citizen benefits. At that time, you will have options like- Monthly Income Schemes offered by post offices, Senior Citizens Saving Schemes available with nationalized banks and post offices, Pension Plans, Liquid Funds and FDs are also good options.


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