Skip to main content

Avenues to plan retirement corpus

Retirement planning need not hinge on a single option. A basket of instruments can do the job


   As you read reports of surging inflation, you begin to wonder if you have enough in your kitty. With many people not used to the habit of retirement planning, the concept is still the last item in the list of things to do. So, if someone gets worried and starts thinking about postretirement life, it is not completely out of place.


   Technically, post-retirement life begins any time after the age of 50 and it is also reflected in the vesting period fixed by many insurance companies. In recent years, however, many individuals have begun to advance this figure by a couple of years due to a number of factors. It could be the dream to start an enterprise or the comfort of a kitty at disposal. While the former may still provide some regular source of income, the latter is technically a zero income period and hence requires greater planning.


   The retirement planning in itself can be divided into a number of components as the general assumption is that an individual has at least a couple of decades to plan for this eventually. While the sum needed for the rest of life is not an easy figure to arrive at, one can take up the process as early as possible. Since income levels too change over a period of time, the allocation can vary for the better over a period of time. Hence, a plan or scheme signed up at the age of 30 need not be the end of all when the investor turns 50.


   One of the good things about retirement planning is that it lets you do the investment over a long period of time. For instance, a parent does not have the luxury of building a corpus for a car purchase beyond 3-5 years and so is the case with planning for a child's future. For instance, a parent cannot think of setting aside a sum for a child's education beyond 20 years. On the contrary, an investor can build a corpus over a period of 30-35 years for his retirement kitty if he thinks about it early.


   There are plenty of options for retirement planning and some may not carry the tag too. For instance, an investment in land or property can take care of retirement needs through their sale. On the other hand, there are also flexible products like stocks, systematic investment plans (SIPs) and pension plans which can come in handy after retirement. The choice of products and allocation has to be according to the comfort of the investor and his financial position. More importantly, one has to keep in mind the flexibility and tax implications of each product as they can have a greater impact over a period of time.


   Among some of the options mentioned, the pension plan has lost flexibility because of restrictions imposed by the regulator, Insurance Regulatory and Development Authority. Now, pension plans come with guaranteed returns. This is a big plus but they have lost flexibility. More importantly, they also carry life cover and hence may not be suitable for all. Earlier, even a 50-year-old could think of a pension plan with a high premium paying term of five years. Now it is not the case as they have a minimum paying period of 10 years and because of life cover, can prove expensive. In a number of products, the premium is directly correlated to the life cover and hence an investor cannot call the shots.


   But the positive aspect of the new pension plan is that it forces the investor to think long-term and is particularly advantageous for young investors. For instance, a 30-year-old gets the advantage of life cover and pension with a single product and because of his age, the mortality rates too aren't high.


   While no single product can do the job of pension planning, a combination of products can definitely do the job. Investors can have a basket of products for their retirement portfolio by opting for equity, debt, pension plan and property among others. More importantly, they have to monitor the performances and shuffle the portfolio at regular intervals.

 

Popular posts from this blog

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...

Mutual Funds: Past Performance is not just everything

Many a times your agent / distributor / relationship manager tries to push you some mutual fund schemes by enticing you with a typical sales pitch…"Sir, this scheme has generated 20% returns in the past one year." And this sales pitch often gets louder when the market conditions have been favourable. Some of the agents / distributors / relationship managers have another unique way of luring you. They say, "Sir / madam this scheme has been awarded the best scheme award in the past by a leading business channel"... And hearing all these sales talks you investors very often get attracted and sign a cheque in favour of the respective scheme.   But please ask yourself do you hear these sales talks when the capital markets turn turbulent? Why is it so that your agent / distributor / relationship manager avoids talking to you during turbulent times of the capital markets and doesn't boast about returns generated by the respective funds or awards being conferred on t...

Dynamic Bond Funds

Invest Mutual Funds Online Download Mutual Fund Application Forms Apart from liquidity and returns, tax efficiency is another factor which should be taken into account for such investments. Today, while you're getting decent, predictable returns from bank fixed deposits, they, along with FMPs, can be ruled out as options because of the lack of interim liquidity. Hence, the only other option that you have is a dynamic bond fund. While investments in dynamic bond funds can be a compromise in terms of returns, they are extremely liquid and more tax efficient.   Some of the dynamic bond funds that you can invest in are: UTI Bond Fund, Birla Sun Life Dynamic Bond Fund Templeton India Income Fund ------------------------------------- Invest Mutual Funds Online Transact Mutual Fund Online   Download Mutual Fund Application Forms from all AMCs Download Mutual Fund Application Forms   Best Performing Mutual ...

L&T Tax Advantage

Best SIP Funds to Invest Online   The fund follows a growth approach to investing in quality stocks that have a large-cap tilt This large-cap tilted ELSS has fared consistently and fared better than its benchmark by posting a higher margin of outperformance. The fund follows a growth approach to investing in quality stocks that have a large-cap tilt, which is evident in its portfolio. The portfolio is further well diversified across market capitalisation and sectors with over 60 stocks finding a place in it. The upside with this fund is the fact that it has witnessed both down and up cycles of the market to come across as a winner in the long run. Do not doubt the fund based on its size and a few mediocre years of performance, because when analysing its rolling three year returns, the fund's performance stands out to qualify as a must have ELSS in one's portfolio. Stay invested through the lock-in and there are chances of benefiting from returns as well as tax savings will prov...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now