Planning for your retirement is one of the most critical activities of your life. You, however, must choose the right investment instruments to help you achieve your retirement goals. Some of the important factors to be kept in mind while selecting the investment options for retirement include age at the time of starting the investment, risk appetite, return expectation, and liquidity requirement. Also, consider inflation and taxation while opting for investment products for retirement.
To help you in your retirement planning, you can choose five attractive investment options in the current market scenario.
Also read: Your Money: Steps to reach your retirement corpus milestone
Equity mutual funds SIP
Investing in equity mutual funds through a systematic investment plan (SIP) gives you the benefit of rupee cost averaging in the long term. The longer you invest, the better rupee cost averaging benefit you get, especially during the volatile market. There are different categories within equity MFs. Each category carries a different level of risk and accordingly offers a return. You may select the schemes in sync with your risk appetite and return expectations.
Adhil Shetty, CEO, Bankbazaar, suggests, “Start investing in the equity mutual fund as early as possible because that’s the stage when you have less financial responsibilities, and can take higher risks. As you get closer to retirement and there’s a drop in your risk appetite, you may start switching allocation from equity class to less-risky investments. Investing in equity mutual funds is one of the best options to beat inflation and create wealth for your retirement.”
Public Provident Fund (PPF)
PPF is one of the few investment products available in the market that offers completely tax-exempt returns. It has a floating interest rate and Section 80C tax benefits. The returns on your PPF investment will rise or fall in line with the interest rate environment. PPF has a lock-in requirement of 15 years, ensuring that the accumulated corpus is not disturbed before maturity. You can invest up to Rs 1.5 lakh every financial year in the PPF account.
Bank FD with laddering strategy
Bank fixed deposits (FDs) are one of the safest and most popular options available. DICGC provides insurance that covers up to Rs 5 lakh on your deposits (principal plus interest) in a single bank. So, if you keep a deposit of up to Rs 5 lakh each in different banks, each deposit will get DICGC cover separately. Since the current market scenario indicates a chance of a hike in interest rates shortly, you should go for an FD with a laddering strategy instead of creating a single FD for the same tenure. It would help if you spread FDs to different maturities with equal maturity intervals in the laddering strategy.
National Pension System
Post-retirement, you will require a regular monthly income. Investing in the NPS can be a good option for this. Investing in NPS allows you tax deduction benefit up to Rs 50,000 under Section 80CCD. NPS allows you to allocate funds into equity and debt asset classes depending on your risk appetite. Being a market-linked investment, NPS should help beat inflation in the long term. Invest in NPS to the extent it doesn’t disturb your liquidity position.
Invest directly in equity
Long-term investment in a good selection of stocks can help you earn an excellent return on investment. Depending on your risk appetite, decide the quantum of allocation to direct shares. Keep your portfolio adequately diversified and do detailed research before selecting a stock for your portfolio.
Retire wealthy
Equity mutual funds are one of the best ways to beat inflation and create wealth
PPF has a lock-in requirement of 15 years, thus allowing you to build a substantial corpus
Since an interest rate hike is likely, go for a laddering strategy with your FDs
National Pension System ensures a regular monthly income post-retirement