Moreover, if we really want to plan for our retirement >20 years from now, it's a good idea to spend an hour or so rather than come to a hasty decision. In fact when you are planning for retirement, you are also, in a single stroke, managing your personal finance. Because retirement investments takes into account your financial goals, income, spending and savings. So it is a good idea to spend some quality time on this.
So, let's start with figuring out your retirement funds, how much every month will you need after factoring inflation and how long will the funds keep going.
(you may like to spend time with this retirement planner, these sheets and calculators)
After you have an idea about your retirement needs, you also figure out how much to invest. And depending on what your income is, you make the decision for savings too. So, in a way, your retirement planning is a complete management of your money too!
Now it's time to weigh the various options available. The common investments options are:
- Pension products from Insurance companies,
- Mutual Funds and
- Post Office investments.
- PPF.
The pension products from the Insurance companies have a high cost structure as they pay a decent amount to their Agents. The Insurance companies have to follow guidelines from IRDA to invest your money which is generally in safe investments (Other than ULIPS where investor bear the investment risk). This affects the returns and the average return can be pegged at around 6% as of now.
ULIP Pension products can give higher returns though the investor bears that risk. But the cost structure of ULIP pension funds is higher than Mutual Funds.
Mutual Funds offer better returns and again they are subject to market risks. But over a long time frame, the returns are really good.
Post Office monthly accounts offer interest @ 8% per annum, payable monthly.
Now, coming back to the question about the best retirement plan, the answer would be a combination of the following products:
Mutual Funds, Public Provident Fund, fixed deposit (FD) and fixed maturity plan (FMP), etc to build the retirement fund while you are young and can take risks.
As the fund grows, the investments can be deployed in avenues like FDs, senior citizens scheme, Post Office Monthly Income Scheme, MF investments with a systematic withdrawal option, FMPs in the dividend distribution mode and monthly income plans, etc to get periodic returns.
Essentially it's like bat like Sehwag first and then let Sachin take you to the winning post!
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8 comments:
Ranjan, your mentioned investment option has majority of Debt instruments. Please read my thought below:
1. Retirement plan should start as early as possible.
2. Investments should depends on age, risk profile and term.
3. Balancing the portfolio time to time is must.
4. Selecting a savings account which give compounded interest rate facility is excellent. Yes, PPF is the better candidate in both way of saving tax and work as savings account too..
5. Remembering the point of don't dip into your savings, PPF work best because of its 15 year lock in period.
6. In the sense of mutual fund, I agree with good diversified one. But, selecting a good index ETF will provide the facility of growing your money with economy and time. RCA method is best for buying ETF and SIP is better for MF.
7. A good ULIP with a long term focus would be best for such purpose. It should be a retirement plan without insurance, good fund performance and low costs.
Seek your reply if I am wrong..
Sherin
http://investinternals.blogspot.com
Gr8 tips to newbies like me thanks....I will be visiting your blog often..
Suman
http://pesit08.blogspot.com
Ranjan,
how come real estate as an asset class has been left out. I believe its an inflation defensive asset in the long term, irrespective of the mess that is going around now.
"Hi Ranjan,
""What is the best retirement plan where we can invest? Alas, this simple question does not have a one line answer!" but you definitely have given a lot of clarity in this single post, thanks for the article. good information about to invest for retirement which will surely help & guide people in planning their investment. another similar thing i found on the internet
Please check this out at - http://www.simpleinsurance.co.in/
"
I am reading a lot of blogs on finance nowadays. It is great to know about life insurance from a customer point of view. Keep posting.
Life Insurance
Nice Read...:)
Everything is very open and very clear explanation of issues. Retirement plan is an essential part of your future financial security. Aegon-Religare offering plan for a secure and tension free life after the retirements, by selecting pension plan at Aegon-Religare.
Ranjan, your retirement plan has not well balanced, if one starts retirement planning it depend on the level of risk one can?
Going through condition a balanced portfolio to be maintained which level of risk I mean percentage of equity and debt. In my view for salaried class PPF is the best option along with SIP in debt or ETF
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