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Are Mutual Fund Retirement Plans Suitable For You?

Adhil Shetty

These plans have a hybrid shade, which means that the money sourced from the investors would be parked in both equity and debt markets. Read more about these retirement plans.

Are Mutual Fund Retirement Plans Suitable For You?

Retirement brings in a mixed bag of emotions. Some rejoice entering the phase while many worry over dealing with a new financial scenario. Hence, it becomes all the more important to invest being young and that too in instruments which ensure a regular flow of income once retirement sets in. While picking up the investment plans for retirement, you also need to keep your increasing needs vis a vis inflation. There are many schemes available in the market that can help the retirement days with a regular flow of income.

In this article, we take a look at Mutual Fund retirement plan and how suitable they are for you.

What Are Mutual Fund Retirement Plans?

These plans have a hybrid shade, which means that the money sourced from the investors would be parked in both equity and debt markets. And in these plans, the investors can invest a lump sum amount or can take the Systematic Investment Plan (SIP) route.

There are many parallels between mutual fund pension plans and Mutual Fund schemes. The principle of Mutual Fund retirement plans is simple: invest during your working life and get a steady flow of income in your retired life. As mentioned earlier, the pooled money is invested in debt and equity markets. The retirement age is fixed at 58 years and withdrawal of money from the scheme is discouraged before one retires.

Once you retire, there are two options for you. Either you can withdraw the amount as a whole or go in for a constant regular income.

Who Can Take What?

Every investment decision revolves around the needs of the investor. So while taking a call on the Mutual Fund-based pension plans there should be a balance between the demands of the investors and the return from each pension scheme. Not to mention wealth creation and income generation through these plans.

So, what should one look for

  • If you want a higher return, there is no looking back, go for Mutual Fund pension plans. Mutual Fund plans can generate better returns compared to PPF and Life Insurance But everything depends on the plans you choose.

Generally, the fund houses offer progressive, moderate and conservative plans and these can go by different names in different fund houses. In a progressive plan, 80%-85% of the pooled money is invested in equities and can provide high returns. Moderate plans have 65% – 85% of the money parked in equities. Conservative plans have up to 30% in equities and would bring lesser returns compared to the progressive plans. So, you have to choose the right plan according to your needs.

  • If you need more flexibility regarding asset allocation, then, without doubt, grab the best mutual fund pension plan at your disposal.
  • If you are looking for something inexpensive the Mutual Fund plans are a good option. The charges won’t burn a hole in your pocket but they are higher than the NPS.
  • You can opt for Mutual Fund pension plans if you receive a huge amount as a retirement benefit. Investing in these schemes would generate regular income for the remaining part of your life.
  • A tax benefit awaits you. The Mutual Fund retirement plans come with a rebate tag under section 80C. That’s indeed a balm for the investors.
  • If capital appreciation is your aim, then Mutual Fund pension plans are for you. Though the equity factor makes these plans risky, the potential for capital appreciation is pretty high compared to PPF and other retirement plans.

Mutual Fund pension plans may not have the same acceptance level of PPF and other insurance-based plans. But when it comes to returns, these schemes fair better with their unique portfolio mix. Select the Mutual Fund retirement plan if you are ready to take a little bit of risk and you will be handsomely rewarded at the end of the day.

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