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Best Investment Plans for Retirement

Updated on: Jan 21st, 2023


5 min read

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Retirement planning should be a part of every individual’s financial plan. It is essential to save enough to look after yourself and your dependents after you retire. We have covered the following in this article:


Why Is Retirement Planning Important?

Once you retire, your income stops. If you don’t have any savings or investments to fall back on, you will find it difficult to sustain. Also, if you are accumulating a retirement corpus in a savings bank account, then inflation will reduce its worth by the time you need it. Hence, you must identify the right retirement plan and start investing in it to tackle inflation.

What Happens If You Don’t Plan Your Retirement?

If you have not planned your retirement with the right schemes, then you may find it challenging to manage your life with the amount you have in hand. This may result in needing to depend on others to cover your expenses. Hence, to avoid this scenario, it is essential to plan your retirement with the right schemes. Several retirement plans help in accumulating a considerable sum for your retired life.

National Pension System

National Pension System (NPS) is a government scheme which intends to provide social security to the working class. Employees working in the public, government, and private sectors can invest in this scheme. Moreover, even those employed in the unorganised sector can also invest in NPS. Under this scheme, the employees will invest in a pension account at regular intervals.

Once they retire, they can withdraw a certain amount of the corpus while the remaining sum will be paid out as monthly pension. NPS contributions are covered under Section 80C of the Income Tax Act, 1961, and provides tax benefits.

Public Provident Fund

Public Provident Fund (PPF) is a government savings scheme covered under Section 80C of the Income Tax Act, 1961. You can save up to Rs 46,800 a year in taxes by investing in PPF. You can invest up to Rs 1,50,000 a year, and these accounts come with a lock-in period of 15 years. Investing in PPF is an excellent way of planning your retirement as it offers an attractive rate of return.

Mutual Funds

Mutual funds are one of the best private schemes to plan your retirement. These are capable of offering returns in the range of 12% to 15% a year. Also, when you invest with a long-term horizon, you will unleash the power of compounding. Since retirement planning is done with a long-term horizon, you can initially invest aggressively in equity funds and then switch your investments to debt funds as you near your retirement. Doing this will ensure that you have accumulated a considerable sum on which you can fall back in your retired life.

Bank Deposits

Bank deposits are one of the traditional options to park savings and surplus funds. You can invest in recurring deposits (RDs). These accounts allow you to invest a fixed sum at regular intervals and offer a much higher rate of returns than a regular savings bank account. If you have a lump sum and would like to set aside the same for your retirement, then you can invest in fixed deposits (FDs). The rate of returns offered by FDs is very attractive, and you would accumulate a significant sum by the time you retire.

Tax Free Bonds

They are a long term investment option with a maturity period that ranges from 10 to 20 years. It fares very well against debt funds and fixed deposits, which makes it ideal for the retirement investment plan. This is suitable for people who are looking for a regular income during retirement. 

Senior Citizen's Saving Scheme (SCSS)

It is a 5 year investment plan which can be extended for an additional three years, offered by banks and post offices. It offers the highest post tax returns among all fixed income tax products. However, this scheme is available only to senior citizens and early retirees.  

Retirement planning should be considered seriously by every earning individual as they can stay financially independent in their retired life. When there are several plans available for the same, it is only wise to make use of them.

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