Kolkata: Planning for life after retirement is one of the biggest financial concerns of most individuals. It is a time when the body increasingly turns
frail. It is the time when medical expenditure can shoot and one needs an adequate corpus to lead a stress-free life. The avowed intention of retirement mutual funds is turning post-retirement life free from tension. Relying solely on pensions, fixed deposits or rental income is no longer considered sufficient.
What are retirement mutual funds
Retirement mutual funds are specifically designed with retirement goals in mind. They fall into the category of solution-oriented mutual funds, which aim to help investors build a healthy retirement corpus over the long term. These funds invest in both equity and debt, maintaining a balance between risk and return. These mutual fund schemes typically have a five-year lock-in period, which is to ensure investors don’t jeopardize their retirement planning by withdrawing funds soon after investing. There are several funds available in this category in India, offering options for different age groups and risk appetites.
How do they work
The money in a retirement mutual fund is invested in a variety of assets. Wen the investor is young, the fund holds a higher equity component to generate better long-term returns. As retirement approaches, investments are gradually shifted toward safer options. This way, the fund adjusts itself to different stages of your life, minimising risk, preserving capital and yet generating the highest possible returns.
Benefits of retirement mutual funds
A very big advantage of retirement mutual funds is diversification. People typically invest in PPF, fixed deposits, or other savings schemes, but retirement mutual funds offer the benefits of both equity and debt. This improves the potential for returns.
Another advantage is flexibility. While PPF or NPS have strict withdrawal rules, retirement mutual funds offer relatively greater flexibility. Many funds offer different plans, such as conservative, moderate, and aggressive, so investors can choose according to their age and risk appetite.
Retirement mutual funds can be a good option for those who want to invest for the long term and understand market fluctuations. Virtually anyone can invest — salaried individuals, freelancers, even small business owners who want a stable income even after retirement. However, before investing in these MF schemes, one should consider one’s age, retirement goals, risk appetite and current investments.
Better performing retirement funds
ICICI Pru Retirement Fund-Pure Equity Plan: 20.68 (3-year CAGR); 24.91 (5-year CAGR)
HDFC Retirement Savings Fund-Equity Plan: 19.47 (3-year CAGR); 24.83 (5-year CAGR)
HDFC Retirement Savings Fund-Hybrid-Equity Plan: 14.81 (3-year CAGR); 18.33 (5-year CAGR)
Nippon India Retirement Fund-Wealth Creation: 16.96 (3-year CAGR); 17.62 (5-year CAGR)
Tata Retirement Sav Fund – Mod Plan: 14.16 (3-year CAGR); 16.90 (5-year CAGR)
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, REITs, InvITs and any form of alternative investment instruments and crypto assets.)
