After years of hard work, the word retirement brings cheer on many faces while some also get jittery with the mere thought of life without a salary. For a happy and stress-free retirement, you envision a regular flow of income without going to work every day. This can be achieved only when you plan your investments well during your working days for the golden years later on. It is crucial, thus, to choose your plans wisely and carefully.
Some of the investment options discussed here can come handy.
Public Provident Fund (PPF) is a great retirement planning scheme as well as tax saving instrument under Section 80C. You can start investing in PPF with an amount as less as Rs. 500 or up to Rs 1.5 lakh maximum each year. The rate of return on PPF are dependent on the average bond yield in the previous year, so expect fluctuations in the returns over time. A PPF account can be opened at your nearest post office or leading banks and of late this facility is available online as well.
NPS too can help investing for long term. It allows you to invest in a mix of stocks, bonds, government securities and alternate assets. Another advantage of NPS, which also allows you to invest in equity, is that it can fetch you an additional tax benefit of Rs. 50,000 under Section 80CCD(1B).
This investment instrument has become phenomenally popular. It can potentially provide greater returns than options like fixed or recurring deposits and is an effective tool for wealth creation. It also caters to investment needs of every kind. You can invest in low-risk mutual funds such as liquid funds, or take higher risks by investing in mid-cap equity funds—or everything in between those two. The biggest advantage of mutual funds is that you can invest in the markets without having to research what to buy, hold, or sell. Your fund portfolio is managed by a fund manager whose job it is to build portfolio to provide the best returns. The ideal way to invest in mutual funds is through a Systematic Investment Plan (SIP), which helps you invest in a regular and disciplined manner whether the markets are rising or falling. In a falling market, an SIP allows you to buy funds at lower costs, while in a rising market, you gain with increased returns. What’s more? The investment in such schemes can start with an amount as low as Rs 500 and can help you in creating wealth for a peaceful retirement.
When you retire, your biggest worry remains managing regular expenses, as monthly paychecks will no longer be there to support you. Insurance has special products that provides a regular income post-retirement. Known as annuity schemes, these provide regular income and can also be used in retirement planning. Therefore, it is important to choose the right annuity plan. There are various annuity plan available in the market and you can chose one by deciding on the amount you wish to receive as pension and when do you want to receive it. For example, a life annuity plan gives guaranteed pension till the death of the person.
Unit Linked Insurance Plans (ULIPs) are a financial tool, which offer both the insurance and investment benefit to the customers. If you invest in ULIPs, a part of the premium you pay goes for your investment needs, and the rest is invested as per your scheme, which could be equity-oriented or debt-oriented. Due to the high risks and rewards, and with the new tax on LTCG on stocks and mutual funds, ULIPs can make a good tool for retirement fund creation.