When you start a new career, many goals stand in front of you, such as a dream car, wedding, travel, etc.
Amidst all these dreams, retirement is a very distant thought at that point. It seems like a long road ahead, and you don’t have to worry about it now, right? Wrong.
It is best to start planning for retirement in the early years of your life. With the concept of pension funds diminishing rapidly, you need to secure your retirement to lead a comfortable life at an old age, i.e., your non-income generating age.
Let us say that you want to retire at 60 years and may live to be 90. Suppose you require ₹30,000 for necessary expenses every month, you will have to raise a total corpus of more than ₹10 crores without taking inflation into account.
For that, you will require at least 50% of the corpus saved up before retirement. So how are you going to make ₹5 crores in 30 years? Is it even possible?
Yes, it is !!
Top Financial Instruments For Retirement
You can raise this money and more if you make smart decisions by considering to invest in the below-listed instruments; though this is not advice nor an exhaustive list of instruments, they are good enough for starters.
1. Equity Mutual Funds
Mutual funds are a pool of funds from various investors collectively invested in securities such as stocks or bonds. Equity mutual funds are known to invest in stocks.
It is very similar to investing in the stock market, but someone else (Asset Management Companies) manages your investments.
You can make regular and periodic investments in mutual funds via Systematic investment plans (SIP). A small investment put aside every month or quarterly could multiply into a huge corpus in the long run. of 30-40 years when your retirement is due.
For example, Let say you are 25 now if you invest 10,000 every month in equity funds at an average of 14% annualized returns. You will have a corpus of ~5.5 crores by the time you are 55.
2. National Pension Scheme (NPS)
As the name suggests, NPS is a pension scheme suitable for all the citizens of our country. It is a low-cost investment available to persons between the ages of 18 – 65.
While this scheme is mandatory for government employees, other corporates also give their employees an option to invest in NPS. It is a low-cost and low-risk scheme. Hence, the returns are also relatively meager in comparison to stocks and crypto-assets.
But NPS is a very tax-efficient scheme for raising your retirement corpus. There is no taxation on withdrawal, making it suitable for risk-averse and conservative retirement-focused investors.
3. Bitcoin Cryptocurrency
Bitcoin is the most sought-after cryptocurrency on the planet. It is a decentralized digital currency supported by blockchain technology and gaining huge traction as a store of value asset too.
Since its inception, Bitcoin has yielded multiple fold returns to its investors.
Recently, the trend of adding Bitcoin as a part of the retirement plan is on the rise. Many companies in the United States have come up with the concept of including it in an IRA account. An IRA account is a tax-exempt pension scheme there in the US.
Bitcoins may sound like a risky bet, but you should know that every investment has its risk. In fact, studies have shown that people add 5%-20% of their retirement funds into Bitcoin in the US.
In India, we do not have a Bitcoin retirement plan yet. However, investing in it is as easy as booking an Uber.
If investing in Bitcoin interests you, you may consider CoinSwitch Kuber- making investing in cryptocurrency easy for you by offering 100+ cryptocurrencies.
4. Public Provident Fund (PPF)
PPF is still one of the most popular retirement funds available in the market. PPF is more like a long-term savings scheme that offers a better interest rate than small savings accounts and deposits.
Currently, it provides an average of 7% return on investment. Similar to NPS, it is low risk and low cost. The returns are high compared to regular bank savings but low compared to high-risk investments such as stocks and cryptocurrencies.
But the most important USP of investment in PPF is, it is tax-free at the time of investment and withdrawal both.
5. Annuity Funds
An annuity is nothing but insurance funds.
It may be a low yielding product, but it is essential for a peaceful retirement. Insurance provides security for your health, wealth, and life at an affordable rate.
Some annuity funds, such as ULIPs, are coupled with investment and insurance. It ensures a regular income from investments while providing you with an insurance cover. Insurance funds also offer tax benefits.
If you want to live an independent and carefree life of a 16-year-old at 60, the best way is by planning for retirement.
No one investment instrument will fulfill all your retirement goals; some will give your high returns, some will give your capital protection, some tax benefits, sp you need to evaluate them as per your requirements.
Based on the corpus required for your retirement and your risk tolerance, of course, you can decide on which instrument to invest in.
No matter where you want to invest, the most important thing is to make up your mind to start planning for your retirement.
Lastly, begin as early as possible; if you start investing now, you will be required to set aside a small part of your earnings only as you are young and your retirement far away.
So start investing now !!
[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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