Let’s say you are 30 years old and you started a monthly SIP with Rs 10,000. You deposited money for 30 years according to 12 percent return. When you turn 60, you will have a deposit of Rs 3.50 crore.
Whenever there is talk of retirement fund, pension plan comes to mind. In this, first the name of EPF epf or PPF ppf comes to mind. Now LIC’s Saral Pension Plan has also been added in this episode. In the midst of all this, we rarely think of mutual funds which can prove to be very effective for retirement. Pension plans like EPF or PPF can be considered good for retirement, but its benefit is less visible in front of mutual funds.
There is some doubt about mutual funds regarding the risk of the market. If you can overcome this and create a separate portfolio of funds, the risk is reduced to a great extent and the quantum of returns increases. Investing 20-30 years in mutual funds and later investing in it through SIP can add a significant amount for retirement. According to the speed with which inflation is increasing, investments in banks or FDs cannot give benefits. For retirement, money will have to be invested where there is a return of more than 10%. In view of this, mutual funds will be more useful than EPF or PPF.
Advantages of Mutual Funds
If you go to take any pension plan, then the minimum and maximum amount of investment is fixed in it. This is not the case with mutual funds. For retirement, you can easily start investing in SIP of mutual funds even with less money. In SIP, every month a certain amount has to be deposited in a fund. There is no maximum investment limit and you can decide the amount to be deposited every month as per your convenience. SIP investor gets information about money management which is useful in retirement.
3.5 crore in 60 years
Understand this with an example. Let’s say you are 30 years old and you started a monthly SIP with Rs 10,000. You deposited money for 30 years according to 12 percent return. When you turn 60, you will have a deposit of Rs 3.50 crore. Hardly any plan will be able to give such a huge return with a light risk. Apart from the returns through SIP, there are many other big benefits. In SIP, you can deposit as little as you want. There is no restriction for this. If you want to make your retirement fund even stronger, you can swap equity and debt plans as per your convenience through Systematic Transfer Plan. By doing this, the risk in the mutual fund decreases and the quantum of returns increases.
There are many more benefits
There is another great advantage of mutual funds for retirement funds. If you want, you can save tax on mutual fund earnings for retirement funds. For this you will need to take Equity Linked Savings Scheme ELSS. You can save your tax liability every year with this. ELSS is a fully tax saving scheme which is exempted under Section 80C of Income Tax. Mutual funds for retirement offer a variety of facilities as compared to pension plans. There are many restrictions and rules on withdrawing money in the pension plan. You can make full or partial withdrawals in mutual funds whenever you want. If you want, you can stop your investment or transfer it to another mutual fund.
DISCLAIMER
We have taken all measures to ensure that the information provided in this article and on our social media platform is credible, verified and sourced from other Big media Houses. For any feedback or complaint, reach out to us at informalnewz@gmail.com
