A MILLENIALS GUIDE TO RETIREMENT PLANNING

While living in the moment seems to be the new mantra on everyone s lips these days, saving for your retirement is even more important than ever. Financial independence not only offers you peace of mind but it also gives you the confidence to chase your dreams. Everyday you put off your retirement gets you more away from your ideal retirement comforts.

First step in your financial planning is to know your monthly income after tax deductions. Later plan your basic budget around the given amount and plan to save as much as possible. While paying taxes seem a hard choice to make especially from your hard-earned money, there is a way to avoid this burden.

Sec 80C of the Income Tax Act allows you to claim deductions from your taxable income by investing in certain investments. One of the most popular Sec 80C investments is in tax saving mutual fund.

Mutual funds not only help you to save taxes , but also give back far higher returns compared to conventional means of investment like fixed deposit or your investment in gold.

While conservative investments minimizes risks, it also limits your financial growth potential.

Read on to know more about the benefits you reap for investing in mutual funds in order to plan for your picture-perfect retirement.,

Flexibility: unlike other pension options mutual funds do not have any restrictions on any payment method and also on any partial or complete withdrawal of funds at any time.

Transparency: In Mutual funds you can select funds as per your choice. The information regarding the Fund manager, investment objective, strategies, past returns, risks associated etc. are publically available but pension products are not that transparent.

Retirement is a long term goal. While saving for it, there will be many life stages when your financial situation will change. Rebalancing your allocations and accommodating changes is easy when your investments have high liquidity and low cost. Mutual funds offer that which makes it a preferred avenue for investing. The key is knowing how much your goal is and when you start. The early starters have an advantage of saving more for it while starting late means you may have to delay your retirement. So if you are thinking to save for your retirement then start investing in mutual funds and make your choice more wiser.

Now, things to keep in mind before planning your retirement through mutual funds

  • Take risk in earlier years to invest more in equity funds and gradually reduce them by moving to low risk options such as debt funds, tax-free bonds and deposits.
  • It is best to rebalance your mutual fund portfolio, preferably every year.
  • Your retirement kitty should be a basket – EPF, PPF, mutual funds (equity and debt; with gold being optional) and other traditional debt options such as deposits.
  • If you have some exposure to mutual funds post retirement, don’t depend on them to declare dividends, if you need monthly income, use the systematic withdrawal plan (SWP) option to create your own annuity plan. SWPs are also very tax efficient, as they enjoy capital gains indexation benefit in the case of debt funds held over a year (equity funds are exempt from capital gains tax)

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