Reserve Bank of India claims that nearly 77% of the individuals have not prepared for retirement yet. And now, with the cost of living getting expensive every year, not planning is risky! While retirement may be years away but have you thought about how you will survive your old age? You would need a fair amount of cash to lead a comfortable retirement life. You’ll have to keep aside some money for your medical expenses too. Therefore, it is best to start planning for your retirement when you are young. That is because it takes time to build a robust retirement corpus.
Now that you are aware of the importance of retirement planning, here are five investment options you can invest in, for a comfortable life post-retirement.
- National Pension Scheme (NPS)
Individuals who are between 18 to 65 years of age, are eligible to invest in the National Pension Scheme, which has two types of accounts – Tier 1 and Tier 2. There are restrictions on withdrawal for Tier 1 accounts, as you cannot take out more than 20% of the contribution if you are below 60. If, however, you are above 60 years of age, you can withdraw roughly 60% of the contribution.
The Tier II account, meanwhile, has no such restrictions. If you opt for Tier I account, you need to contribute 10% of basic salary and dearness allowance. Your employer needs to make the same contribution as well. For Tier II account, the minimum contribution is Rs.250 every month. You also need to maintain a balance of Rs. 2,000 at the end of each financial year. This scheme can help you save tax too. As much as 40% of the retirement corpus is not taxed at maturity.
- Employee’s Provident Fund (EPF)
This is a popular investment instrument for retirement savings, which helps your money grow, and also provides tax benefits. The money you receive, once the scheme matures, is tax-free. Be mindful of applying for EPF transfer in case of a job change. If you forget to do so, you will miss out on the benefits of compounding.
Equity-related instruments like stocks and mutual funds have the potential to fetch high returns. What’s more, they are tax-free after a year of investment. Ensure that you are investing in the long run. That’s because stocks are prone to high volatility in the short-term.
This is the reason why a lot of people stay away from financial markets. While they can offer you high returns, there is also a possibility of losing your investment. Hence, it is best that you do thorough research before investing in them.
Bonds are considered a safe investment. Bonds are basically loans that you give to the Government or a company, who then pay you interest in return. Bonds can offer high-interest rates. You must, however, ensure the bond has good ratings before you decide to invest in them.
- Fixed deposits (FDs)
As one of the safest investment instruments for retirement planning, FDs have fixed tenor and interest rates. You can invest with issuers like Bajaj Finance Limited, to get FD interest rates up to 8.35% on Senior Citizen Fixed Deposits.
Also, for investors who don’t want to set aside a large corpus to invest in FDs, Bajaj Finance offers Systematic Deposit Plan with monthly savings starting with just Rs. 5000 per month. This can help regular savers start saving without having to save a huge corpus for investing in FD.