Planning Your Retirement? Here’s How to…

Nutan Gupta

08 Jun 2017

New Page 1

Prolonging a plan that would determine the way you live the rest of your life is nothing but your short sightedness. Carpe diem! As a way of living is fine but considering the need to save for your future is also a part of your present day living. Youth today do not give in much thought on saving for the future because they have lived with their parents, grandparents living a life of frugality and have constantly heard their boring talks throughout on saving in stocks, mutual funds and bonds and are now done with it. The young today want to live a luxurious life without compromising on their dreams of flashy cell phones, expensive cars, designer clothes, accessories and exotic travel ideas. Living in the moment is what they preach and the path to planning their secured future through savings is a difficult idea for them to process. There are many options to live your life, likewise there are many options to go on saving without pushing it to "you know one day on the right time", saying. Instead of daydreaming about your non-existent hypothetical future, start saving for your future and taking appropriate actions today.

Retirement Planning in India is not an easy job at all. There are a plethora of options to opt from but the slow economic growth, rising inflation and RBI’s changing stance exceeds confusion and makes retirement planning a daunting and overwhelming task.

We make the choosing process easy by defining the different retirement products available for investment in India. Retirement is divided into two phases – Accumulation and Distribution. Accumulation period is the phase where an individual accumulates the amount required for people’s post retirement needs. Distribution period is the phase where the accumulated amount over the years is distributed well to ensure your post retirement needs are well looked after. 5 financial products for investment for your pre-retirement and post retirement period are:

1) NPS: New Pension Scheme or NPS is an ideal retirement product as for the last four years the pension scheme is providing an annual return of 10% to all individuals across the country. NPS provides tax relief under the section 80C.

A thing to remember while investing with NPS is that individuals are bound to purchase annuity 40% of the amount accumulated at the time of retirement. It is advisable to use the pension calculators from Govt. of India to calculate the basic and family pension commuted.

2) EPF: Employee’s Provident Fund is definitely the most popular retirement saving instrument which salaried class just cannot manage to escape. Though EPF was constituted and brought into action as a retirement product, it does not seem to be so for the salaried class today.

The Provident Fund allows employees to attain a tax rebate of up to Rs 1 lakh under section 80C and also gives an interest return of 8.5% p.a. Interest attained from EPF has been made tax free and withdrawal is also tax free if there is continuous service of 5 years.

For those who invest in EPF, it is advisable to remain invested in this scheme even after opting out of a job from one company as this would allow you to reap benefits with the power of compounding interest in the long run.

3) Equities: You can invest in any of the financial products that you want to but none can guarantee and match the returns of Stocks and Mutual Funds. It is advisable to invest for a minimum of 10 years while investing with Equities. However, in the long run you can review the growth of your investment and switch to better performing products if you are unhappy with your investment’s performance. Mutual funds offer the option SIP- Systematic Investment Plan to help you get disciplined about saving for your retirement. Equity products are tax free after 1 year of investment.

4) ETF: Exchange traded funds is a good option for saving for your retirement. You can invest in ETF through Index or Gold and the units of these can be purchased every month ensuring the benefit from cost averaging and avoid investing in bulk and entail the risk of timing the markets.

5) Bonds: Bonds are papers issued by a company or the government on the exchange of loan money taken from you. They offer you an interest as return on the loan principal taken from you. There are numerous bonds available for investment such as IIFCL tax free bonds, HUDCO bonds, inflation bonds, etc.

These bonds are of 10 to 15-year duration and offer an interest rate of up to 10-12%. Some of these bonds offer interest rates more than 10-12% p.a.

After reading this don’t sit over the plans, take an action and start investing now.

New Pension Scheme

Employer Provident Fund

Equities

Exchange Traded Funds

Bonds

Interest Return

10% since the last 4 years

8.5% pa

Depends on the Market Price

Depends on the Market Rate on the Day of Selling

10-12%

Tax Rebate

Relief provided

Up to 1 lakh

Tax free after 1 year of investment

-

Tax free bonds available

Time Duration

Long Term

Minimum of 5 years to receive benefits

Minimum 10 years

No fixed time

10-15 years

 


Similar articles

  • Responses
  • Patidar Samaj

    - 2 hrs ago

    This article claims RJio was given a "Backdoor Entry" into the 4G Based Voice Routing. The peculiar aspect is without the Voice License, Rjio would have been a mere ISP. With the license, it is now a holistic communications service provider, with ability to exponentially scale the bouquet of products. The events indicate it was meticulously planned way before the auctions because the auctions were clear on the agenda: 4G for internet only.

Load More
mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


Banner

Planning Your Retirement? Here’s How to…

Nutan Gupta

08 Jun 2017

New Page 1

Prolonging a plan that would determine the way you live the rest of your life is nothing but your short sightedness. Carpe diem! As a way of living is fine but considering the need to save for your future is also a part of your present day living. Youth today do not give in much thought on saving for the future because they have lived with their parents, grandparents living a life of frugality and have constantly heard their boring talks throughout on saving in stocks, mutual funds and bonds and are now done with it. The young today want to live a luxurious life without compromising on their dreams of flashy cell phones, expensive cars, designer clothes, accessories and exotic travel ideas. Living in the moment is what they preach and the path to planning their secured future through savings is a difficult idea for them to process. There are many options to live your life, likewise there are many options to go on saving without pushing it to "you know one day on the right time", saying. Instead of daydreaming about your non-existent hypothetical future, start saving for your future and taking appropriate actions today.

Retirement Planning in India is not an easy job at all. There are a plethora of options to opt from but the slow economic growth, rising inflation and RBI’s changing stance exceeds confusion and makes retirement planning a daunting and overwhelming task.

We make the choosing process easy by defining the different retirement products available for investment in India. Retirement is divided into two phases – Accumulation and Distribution. Accumulation period is the phase where an individual accumulates the amount required for people’s post retirement needs. Distribution period is the phase where the accumulated amount over the years is distributed well to ensure your post retirement needs are well looked after. 5 financial products for investment for your pre-retirement and post retirement period are:

1) NPS: New Pension Scheme or NPS is an ideal retirement product as for the last four years the pension scheme is providing an annual return of 10% to all individuals across the country. NPS provides tax relief under the section 80C.

A thing to remember while investing with NPS is that individuals are bound to purchase annuity 40% of the amount accumulated at the time of retirement. It is advisable to use the pension calculators from Govt. of India to calculate the basic and family pension commuted.

2) EPF: Employee’s Provident Fund is definitely the most popular retirement saving instrument which salaried class just cannot manage to escape. Though EPF was constituted and brought into action as a retirement product, it does not seem to be so for the salaried class today.

The Provident Fund allows employees to attain a tax rebate of up to Rs 1 lakh under section 80C and also gives an interest return of 8.5% p.a. Interest attained from EPF has been made tax free and withdrawal is also tax free if there is continuous service of 5 years.

For those who invest in EPF, it is advisable to remain invested in this scheme even after opting out of a job from one company as this would allow you to reap benefits with the power of compounding interest in the long run.

3) Equities: You can invest in any of the financial products that you want to but none can guarantee and match the returns of Stocks and Mutual Funds. It is advisable to invest for a minimum of 10 years while investing with Equities. However, in the long run you can review the growth of your investment and switch to better performing products if you are unhappy with your investment’s performance. Mutual funds offer the option SIP- Systematic Investment Plan to help you get disciplined about saving for your retirement. Equity products are tax free after 1 year of investment.

4) ETF: Exchange traded funds is a good option for saving for your retirement. You can invest in ETF through Index or Gold and the units of these can be purchased every month ensuring the benefit from cost averaging and avoid investing in bulk and entail the risk of timing the markets.

5) Bonds: Bonds are papers issued by a company or the government on the exchange of loan money taken from you. They offer you an interest as return on the loan principal taken from you. There are numerous bonds available for investment such as IIFCL tax free bonds, HUDCO bonds, inflation bonds, etc.

These bonds are of 10 to 15-year duration and offer an interest rate of up to 10-12%. Some of these bonds offer interest rates more than 10-12% p.a.

After reading this don’t sit over the plans, take an action and start investing now.

New Pension Scheme

Employer Provident Fund

Equities

Exchange Traded Funds

Bonds

Interest Return

10% since the last 4 years

8.5% pa

Depends on the Market Price

Depends on the Market Rate on the Day of Selling

10-12%

Tax Rebate

Relief provided

Up to 1 lakh

Tax free after 1 year of investment

-

Tax free bonds available

Time Duration

Long Term

Minimum of 5 years to receive benefits

Minimum 10 years

No fixed time

10-15 years