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Thinking About Retirement? Choose the Right Investment Option

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  • 04 Feb 2023
Thinking About Retirement? Choose the Right Investment Option

Choosing the right investments for the retirement phase is often a crucial decesion; one must consider many factors like ease of investing return percentages which are steady with fewer market risks. Many investment options can ensure these returns and be termed retirement investments.

Therefore, if someone is planning to retire, they can keep the following investment options in mind and start saving accordingly:

A PPF or Public Provident Fund is a dedicated saving scheme for retirement. It is a government-organized account that provides tax benefits every year in the income tax return up to Rs.1.5 lakh and provides steady income after retirement. Some can even consider this as an investment option for retirement. It's safe and won't need to worry much about returns.

  • Pro: Government-backed fund
  • Con: Lock-in period of 15 years

ULIP or a Unit Linked Insurance Plan combines insurance and investment. You reap the benefits of the insurance and gain an advantage from the profits of the investment done in stocks and equity or debt instruments. It is a combination of safe and risky investments and is helpful for retirement planning as it has good wealth generation options with the benefits of life insurance. ULIP does not allow withdrawal of the amount until the expiry of a minimum of 5 years. Therefore, after the maturity period, if the policyholder survives the term of the ULIP, they get the maturity value of the ULIP. However, if the policyholder passes away during ULIP, their nominee receives the maturity amount.

  • Pro: Provides good returns with tax exemption
  • Con: Prone to market fluctuations

Mutual funds can be termed as the new age of fixed deposits. Invested in stocks and bonds, mutual funds give phenomenal returns with expected risks at par with fixed deposits. However, since Mutual Funds provide Systematic Investment Plans, it is easier for retirees to invest the money at their convenience. Mutual Funds can offer higher returns and can significantly contribute to wealth collection. It is understood that a person approaching retirement or already retired would be less interested in putting significant money at stake; hence a medium-risk option may be worth exploring for them.

  • Pro: Varied and advanced portfolio management,
  • Con: High expense ratios

National Pension Scheme (NPS) is a government-organized scheme. It was launched for the sole purpose of pension saving for individuals in old age. This fund has a combination of stocks, bonds, and government securities. The investor also gets the tax benefit of Rs 50,000 under 80CCD. NPS Accounts are easier to operate, highly flexible, safer wealth collecting option, transparent, and most importantly, provide a reasonable interest rate. Any resident citizen of India willing to invest in Pension Schemes can open and access an NPS account.

  • Pro: Lower investment and higher returns
  • Con: A person cannot open multiple accounts

Conclusion

If you're planning to retire, you must prepare for it properly by making investments that give you good returns. There are various schemes you can opt for. Today, numerous retirees can partake in a similar life as they did before retirement. They are monetarily free as they have made legitimate arrangements for their brilliant years. Yet, it could be hard for a few retired persons to carry on with a similar way of life because of inefficient retirement planning.

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