Guide to Retirement Investment Options in India

Investing money for your old age is one of the wisest decisions you can ever make. For starters, investment planning for retirement will provide you with the peace of mind that you are financially secure when you are no longer of working age. Additionally, it also allows you to live the type of lifestyle you have become accustomed to.

Fortunately, several profitable retirement investment options make it easy to plan for your future. With both pre and post retirement options available, finding the best retirement investments just got a lot easier.

Investment Options for Pre and Post Retirement in India

Why You Should Plan for Retirement Investments Now

Experts always recommend creating a retirement fund investment as early in your life as possible. Essentially this will allow your money to grow and develop into a large financial corpus over time. Investing for a longer period also enables you to benefit from the power of compounding interest.

Before Retirement Investment Options

1. Equity/Mutual Funds Pension Schemes

   When you’re considering investment planning for retirement, one of the more popular options is without a doubt mutual funds. For the most part, a mutual fund pension plan is considerably less risky as they’re managed by professional fund managers.
   Aimed at medium to long-term investors, retirement mutual funds in India enable you to select from equity mutual funds to create a portfolio that suits the type of financial corpus you want to create. Mutual fund pension schemes are often top choice as they don’t have the risk that goes along with a regular investment plan.

2. Exchange Traded Funds (ETFs)

   One of the best retirement investments is the Exchange Traded Funds (ETFs). This type of investment is bought and sold on various stock exchanges which hold commodities such as stocks and bonds.
   While it is similar to a mutual fund in many regards, ETFs differ in one key aspect. Unlike a mutual fund, ETFs can easily be sold at any time during the original trading time frame. ETFs are also considerably more diverse.

3. Real Estate and Assets

   Investing in real estate is also a firm favorite of people looking for a long-term investment. The more popular options include commercial properties and houses. During the investors working life, the property is rented out and income is generated.
   This income can then be re-invested to ensure that there will be a monthly income after retirement. Furthermore, the insured can continue to lease the property or simply sell it and live off the profits at any time before or after retirement. This type of investment is a secure savings plan for retirement. The success of the venture will largely depend on the type of property selected. It’s also not uncommon to have a portfolio that contains several properties.

4. Bonds

   With a savings bond, the policyholder initially pays the principal amount (cost) of the bond to the insurer. The bond insurer then pays the holder the interest generated on the lump sum amount.
   This is done at regular intervals, while the principal amount is paid at the time of the bond’s maturity. An aspect that makes bonds very appealing is that there are extensive tax benefits at the time of investment.

5. Public Provident Fund (PPF)

   A Public Provident Fund, also known simply as PPF, is a government-sponsored savings plan. Regarded by many as safe investments for retirement, these types of savings plans offer substantial capital appreciation which works well when you’re trying to create a long-term financial corpus.

After Retirement Investment Options

1. National Pension Scheme (NPS)

   Another favorite government-sponsored savings plan is the National Pension Scheme, more commonly referred to as NPS. Anyone within the age group 18-70 can join the NPS and policyholders will receive a minimum of 5.34% annual return per annum.

2. Post Office Monthly Income Scheme (POMIS)

   As the name suggests, the Post Office Monthly Income Scheme, or POMIS, is an income scheme from the Post Office of India. An investor deposits the minimum investment of Rs 1,000.
   The maximum investment is usually about four and a half lakh for a single account. For a joint account, the investment option is nine lakhs. Furthermore, the savings plan runs for a period of five years. Generally, though, POMIS is not recommended for earners falling into the higher income tax bracket because the returns are taxable.

3. Annuity

   For the most part, an annuity is geared toward generating a steady income during the retirement period. A policyholder will invest a lump sum and obtain a specified amount in the future.

4. Bank Fixed Deposits

   For many people, bank fixed deposits are their first choice for after retirement investment. This type of investment enables the policyholder to deposit money for a fixed maturity period which can range from fifteen days to five years and above.
   Additionally, this type of savings plan allows the investor to earn a considerably higher interest rate than other more conventional savings account types. At the time of maturity, the investor will receive a return that is generally equal to the original investment as well as the interest earned over the policy period. This makes a bank fixed deposit one of the more lucrative plans for investment after retirement.

How to Pick The Best Investment Options for Your Retirement

There certainly is no shortage of retirement fund investment options to choose from. That said, here are a few pointers to keep in mind when you’re shortlisting potential options.

1. Safe Investments for Retirement

   If you’d rather not rely on one of the government-backed options and you feel that the bank may not provide you with the return you want, safe investments are the better option. It’s important to consider what they’re offering to contribute to your financial portfolio.
   Smart investment plans have the potential to outpace inflation while at the same time growing in value. You can also decide whether you want to invest your money as a lump sum or a monthly premium. Safe investments for retirements are often the most lucrative form of building a hefty corpus. It’s crucial to only invest with reputable companies.

2. Government-backed Schemes

   Government-backed schemes such as the Senior Savings Plan (SCSS), the National Pension Scheme (NPS) and the Employee Provident Fund (EPF) offer excellent capital appreciation as well as investment security. Depending on your current tax bracket, these plans could offer you extensive tax benefits and rebates.
   It’s also worth noting that the current SCSS interest rate is 7.,4% per annum and in some cases will offer much higher returns than those offered on fixed deposit savings account types. However, money needs to be deposited into your SCSS account as a single premium and has a limit of Rs 15 lakhs.

3. Savings Plans

   When you’re considering savings plans such as bank fixed deposit options, it’s crucial to compare the expected interest rate. Additionally, compare the amount you will potentially receive at retirement to the amounts offered by other investment plans.
   Essentially the general charges to maintain the account will be considerably lower than those offered on an investment plan. While banks are generally the safer option, you want to create the most financially strong corpus with the safest risk factor.

Conclusion

If you’re considering retirement investment options, it’s crucial to understand the differences between the various choices. That will help you make the most informed decisions about your financial future. Choosing the best investment option will ensure that you have a significant financial corpus to dip into when you eventually retire!

Disclaimer: