Why you need mutual funds for retirement planning

Why you need mutual funds for retirement planning?

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Why you need mutual funds for retirement planning?

The cloud of inflation ever looms the finance market. Knowing this, the best one can do in these circumstances is brace up for its arrival and its effects — have a financial plan which generates enough returns for you to sail through market crises in prosperity.

Traditionally, there has been much reliance on small savings schemes, such as the National Saving Certificate Scheme, Public Provident Fund (PPF), Employee Provident Fund (EPF), and insurance policies. However, the major problem with such approaches to financial backing was that they hardly beat inflation. The prices kept rising, and the savings were only enough to be called apt returns. With time, better investment opportunities unfolded, and the entree of the private sector into the mutual fund sphere opened up doors to several promising schemes that could be purchased with much ease.

Currently, there are several retirement mutual funds that are available in the market. These funds, at an average, offer competitive market returns and can extend up to a period of three, five, and ten years respectively. This also goes with Securities and Exchange Board of India (Sebi)’s definition of a retirement scheme — a retirement solution which has a lock-in period of five years till retirement age, qualifying for tax deductions under Section 80C of the Income Tax Act. Sebi also makes sure that all the mutual funds are well-regulated and protect the interest of the investors. It also makes all mutual fund programs compulsory to disclose their portfolio every month so that there is enough transparency in the process.

Why plan retirement with mutual funds?

Central government employees have much of their retirement figured out — thanks to the retirement schemes provided by the government. However, for those working in the private sector, retirement is something they need to plan out thoroughly. A mutual fund could just be the choice for that.

Mutual funds offer high returns in the long run as they pool money from several investors, and invest it in debt, equity stocks, and other money-making instruments. It can help you build a complete corpus for your retirement days.

Choosing a Systematic Investment Plan

Systematic Investment Plans (SIPs) have grown to be a popular way of investing in mutual funds. Under a SIP scheme, you invest a fixed sum of money at regular intervals. Although there is no upper limit when it comes to investing in a SIP scheme, it is recommended that you decide upon a fixed sum every month, just to bring in some discipline in your investment schemes.

If you have a good twenty to thirty years before you retire, then systematic investment plans are an option that you should definitely be looking at.

For example, let us say that you decide to invest Rs 10,000 every month under a SIP program at 30 years of age. So by the time you reach 60 years of age, you will have Rs 3.50 crore as a corpus, considering the returns on your investment stand at 12 percent per annum. SIPs are one of the few investment plans that offer such attractive returns at low risk with such high rates.

Here are some of the benefits of using SIP schemes:

  • The flexibility to invest as much as you want, there is no minimum requirement of a SIP program

  • It is easier to switch between debt and equity instruments with the aid of a systematic transfer plan. Switching between these helps you better manage the risks that might come as you age, and think that you could have saved more money.

  • You also get the option to save on your income tax liabilities under Section 80C of the Income Tax Act.

It is easier to be tempted with a pension plan for your retirement years and not go for a mutual funds plan. However, mutual funds continue to be one of the safest and most trusted instruments for your retirement savings. Let’s look at some of the reasons why mutual funds could just be an answer to your retirement call.


One of the best features of mutual funds is that they are highly transparent when compared to other pension plans, and all the information that you need is rightly provided upfront to you. You can access all the information at the tip of your fingertips. Accessibility and transparency are two of the most-cherished features that a good mutual fund scheme brings with it on the table.


Mutual funds are good tax-saving instruments when compared to generic pension plans. The income you earn from your pension plan is added to your other income — there is no exception on the tax. However, long-term capital gains on equity mutual funds are free up to 1 lakh. On the other hand, in case of debt funds, the tax is levied after the indexation process which then mostly reduces the tax to nil.


With mutual funds, there is no restriction on making entire or partial withdrawals at any point in time, and this makes them more flexible than the traditional pension plans. You can choose to discontinue your current investment plan for another mutual fund at any time — whenever you like.

Mutual funds on Finserv MARKETS, today, make for an active retirement option as they come with zero percent commission, which means that you get to invest in your desired products without having to worry too much about spending too much in commissions. The process of opening a mutual fund account is also fast, easy, hassle-free, and can be done with just a few clicks on your smartphone or computer. All you need to do is submit your documents to complete a basic KYC process and you will be good to go!

Once you have opened your account, you get access to detailed portfolio insight and summaries, so that you can know how your investments are doing in the market. You also get access to exclusive features based on your risk appetite and investment goals, making personalised financial planning a walk in the park.

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