Mutual fund plans for retirement- How do you manage them?
There are several retirement mutual fund plans in India. Mutual funds should be considered as a good retirement benefit plan in India and you will find them coming with several other advantages including the age-linked investment asset allocation facility which is a major plus point by all means. However, choosing the right retirement fund in India should be done with care and you should execute your retirement planning in India on the basis of several factors including your appetite for risks, your financial position and your future goals at the time of retirement.
Retirement mutual fund plans in India can be good options since they essentially pool funds from various investors before investing this corpus into multiple equity stocks, money market instruments and debt instruments. They can offer attractive returns for the long haul if you can stay invested and ride out temporary market fluctuations or volatility. They will help greatly in building a suitable retirement corpus accordingly.
Retirement benefit plan in India- Investing in suitable mutual funds
In most cases, investors usually opt for pension plans which are good options although they are not as efficient and attractive as a retirement fund in India. Mutual funds enable greater exposure to equities although they help in lowering risks via portfolio diversification as well. You should a horizon of at least 20-30 years for investment and SIPs (systematic investment plans) will enable accumulation and compounding of wealth more affordably. SIPs will help you invest money in mutual funds in a more disciplined way. You will be investing fixed amounts in chosen funds on a monthly basis and there is no upper limit for investments through SIPs. However, you should ideally set a particular amount that you can easily afford each month. Along with inculcating greater financial discipline amongst investors, SIPs help in managing investments better which further aid superior retirement planning as well.
You can invest a comfortable amount in the beginning and then scale up with an increase in your income. You can switch easily between debt and equity instruments through systematic transfer plans (STPs) and this will help you lower overall risk exposure with the onset of age. Via ELSS, you may get tax benefits up to Rs. 1.5 lakh under Section 80C. However, these plans come with 3-year lock-in periods. Mutual funds offer greater flexibility in comparison to pension plans since there are zero restrictions on making full/partial withdrawals at any time. You may discontinue your investment anytime and switch to another fund as per your desires as well. ELSS tax benefits aside, mutual funds have greater tax efficiency in general. LTCG (long term capital gains) will be tax free till Rs. 1 lakh for equity mutual fund investments while taxes are imposed post indexation in case of debt funds which may reduce applicable taxes to a nominal sum in most scenarios.
