Given below are the seven most popular types of retirement plans that you can choose to ensure a stress-free retired life.
1. Public provident fund (PPF)One of the most popular financial instruments which you can use to build a retirement corpus is PPF. A government-backed scheme, PPF is an EEE instrument. It means the money invested, interest earned and the maturity amount are tax-free.
The money invested in PPF qualifies for tax deduction under section 80C of the Income Tax Act. With a lock-in period of 15 years, PPF can help you compound your money in the long-term.
2. National pension scheme (NPS)Another government-backed initiative, the national pension scheme (NPS) allows you to make regular contributions in your working year to build up a retirement corpus. It gives you the flexibility to choose your asset mix and offers tax benefits under section 80C and 80CCD.
Upon retirement, you can withdraw 60% of the corpus as lump sum, while the rest 40% is used in purchasing annuities, providing a regular source of income.
3. Atal Pension YojanaPrimarily targeted for those working in the unorganized sector, the Atal Pension Yojana gives the option of receiving pension ranging from Rs.1,000 to Rs. 5,000 upon attaining the age of 60. The pension amount is determined as per your age and contribution.
In this scheme, you should contribute for a period of 20 years. You can opt for this scheme in any nationalised Indian bank.
4. Annuity plansAnother popular type of retirement plan, annuities can help you generate income during your post-retirement years. There are two distinct phases of such plans. In the first phase, you need to contribute towards the plan.
In the second phase, you will start receiving the pay-out to take care of your post-retirement needs. You can buy annuity plans from insurance companies.
5. Senior Citizen Savings Scheme (SCSS)If you are above 60 years or have opted for voluntary retirement scheme (VRS), you can opt for SCSS. Backed by the government, you can invest a maximum of Rs. 15 lakhs in this scheme. You can opt for SCSS is any scheduled commercial bank or post office.
The rate of interest is reviewed every quarter by the Government, and you receive the pay-out from SCSS every quarter.
6. Pradhan Mantri Vaya Vandana Yojana (PMVYY)A pension scheme available for senior citizens, PMVYY offers guaranteed pay-out of pension for a period of 10 years at a specific rate. The minimum entry age is 60 years and the maximum amount you can invest is Rs. 15 lakhs.
You can choose to receive the pension either monthly, quarterly, half-yearly or yearly. You can also prematurely withdraw from the scheme. However, such withdrawal is allowed only in the case of critical or terminal illness.
7. Build corpus through disciplined investments in mutual fundsThough not any specific plan, you can build a retirement corpus through regular and disciplined investments in mutual funds. You can set up a systematic investment plan (SIP) in a fund offering high returns over a sustained period of time.
SIP inculcates a disciplined savings habit and averages out the risk in the long term. Even a modest SIP of Rs. 5000 in a fund offering annualised returns of 12% for a period of 20 years can help you garner a corpus of Rs. 49.46 lakhs (subject to market fluctuations).
To sum upPlanning retirement in the right manner requires prudent investments. Also, it’s important to begin early to ensure you give more time to your money to grow.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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