Retirement Planning: From MFs To PPF, 5 Investment Options You Should Consider
It is important to plan your retirement with the right schemes so that you don't have to rely on others to cover your expenses in your old age.
%2011_07_24.jpg?rect=1%2C0%2C2478%2C1394&auto=format%2Ccompress&fmt=avif)
Retirement planning is considered a crucial step when it comes to a secure and comfortable future. Once you retire, your income stops and you can't just be dependent on the pension. With rising inflation and the increasing cost of living, financial planning has become essential so that you can avoid potential financial crunches in the future.
It is important to plan your retirement with the right schemes so that you don't have to rely on others to cover your expenses. Everyone has their own financial requirements, but it's best to start earlier to benefit from the power of compounding.
Here are the top five retirement investment options you should consider:
1. National Pension System (NPS)
It is a scheme backed by the government in which you invest a certain amount in the form of equity, debt, or bonds. You save a portion of your income during your employment years so that you have a steady income after retirement.
To invest in the NPS plan, you need to deposit money on a regular basis, such as monthly, quarterly, or yearly. Over time, your money will grow, and at retirement, you can withdraw up to 60% as a lump sum and the remaining 40% can be used to buy an annuity.
2. Mutual Funds
This is one of the best private schemes to plan your retirement. You can choose a Systematic Withdrawal Plan (SWP) that gives you a monthly income from your mutual funds. Mutual funds offer returns in the range of 12 to 15% per annum.
For example, when you retire, you have Rs 30 lakhs in mutual funds. With a SWP, you can choose to withdraw Rs 20,000 to Rs 30,000 every month as your regular income and you can continue earning interest on the rest of the amount.
3. Insurance
Investing in medical insurance can help you a lot after retirement. If you don't have a regular income, a decent health insurance plan can help you save money by paying for surgeries, treatments, and hospital fees. The sooner you acquire it, the better, because you can get more coverage at a low premium.
There are also special insurance plans for senior citizens that include health check-ups, critical illness coverage, and lifelong renewals. So, you will not have to spend your entire retirement savings on your hospital bills if you have a health insurance plan.
4. Bank Deposits: RD and FD
Bank deposits are one of the safest and most traditional ways to save money. You can either choose Recurring Deposits (RDs) or Fixed Deposits (FDs), depending on your needs. If you want to save a small fixed amount every month, you can go for an RD. It gives a better interest than a regular savings account.
On the other hand, if you have a lump sum amount, like Rs 5 lakh, you can put it in an FD, which gives a higher interest rate compared to your savings account. So, bank deposits help you grow your money safely and can be used after retirement to manage daily expenses and medical costs, or emergencies.
5. Public Provident Fund
Public Provident Fund (PPF) is a government-backed long-term savings plan that gives you a guaranteed return on your investment. In this, you invest a fixed amount, minimum Rs 500 and maximum Rs 1.5 lakh, every year. It has a lock-in period of 15 years and offers returns at the rate of 7.6% a year. So, by the time you reach your retirement age, you are likely to have a sizable corpus.
For example, you start a PPF account at the age of 40 and contribute Rs 1 lakh every year for 15 years. After 15 years, your PPF account will grow to around Rs 27 to Rs 30 lakhs. This is a tax-free sum that can be used for retirement expenses.
