As economic insecurity is rising, common people are becoming more and more aware of the pressing need to plan for post-retirement years.
Mutual Fund SIP
Investing in mutual funds through Systematic Investment Plan (SIP) is catching on fast across the country. One can invest relatively small amounts of money in mutual fund schemes according to one’s convenience.
The trick is to start early in life and invest for as long as possible. For example, if one invests only Rs 5,000 a month in mutual fund SIPs at 20 and continues for 40 years, nearly Rs 6 crores will be available in the 40th year. A return of 12% has been factored in the above calculation.
Public Provident Fund
The Public Provident Fund or PPF is a guaranteed-return debt instrument which has an initial lock-in period of 15 years. However, there is no limit to the investment period and one can keep increasing it by multiples of 5 years.
The rate of interest PPF pays right now is 7.1%. If someone begins investing in a PPF account Rs 1.5 lakh every year – that’s the ceiling – and continues it for 35 years, one can run up a pool of nearly Rs 2.27 crore. One can start this account from the time one turns 18.
National Pension System
The National Pension System or NPS is also a significant generator of funds in the long term. It will pay a pension to the contributor when he/she turns 60. The amount will depend on the amount of contribution.
NPS calculator tells us that is a 25-year-old begins to invest Rs 2,000 every month in an account and continues it till the age of 75 (which is the maximum age one can continue), the pension will be Rs 69,875 at a minimum – if one buys annuity with 40% of the accumulated funds.
Atal Pension Yojana
The Atal Pension Yojana has 5 slabs of pension – Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 and Rs 5,000. The amounts are backed by guarantee of the government. One can contribute from the age of 18. One needs to contribute only Rs 248 a month (or Rs 739 every quarter) for a Rs 5,000 pension at 60 if one starts contributing at the age of 20.
The significance of retirement planning is increasing in the modern world and one can ignore it only to one’s peril. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
