How to Invest in Retirement Plans for a Secure Future?

What are Retirement Investment Plans?

What are the Different Types of Retirement Investment Plans?

What are the Benefits of Retirement Pension Plans?

Who Should Buy Retirement Plans?

How Much Do You Need to Save for Retirement?

Why Should You Start Planning Your Retirement Investment Early?

What Factors to Consider for Buying Retirement Plans?

How to Choose the Best Retirement Scheme?

Steps to Buy a Retirement Plan

Which are the Best Retirement Plans in India?

To ensure financial independence during your post-retirement phase, you have the following financial instruments and schemes to choose from.

Retirement Pension Schemes Details
Public Provident Fund (PPF) It is a 15-year government-backed retirement scheme that can be extended indefinitely and offers attractive, risk-free returns. One can start investing with only ₹500. All taxpayers, except HUF and NRI, can invest in PPF.
National Pension Scheme (NPS)
  • It is a long-term market-linked pension investment product for 18–to 60-year-olds. One can invest in the following types of NPS-
  • Tier I – It has a minimum opening amount of ₹250 and does not allow withdrawals.
  • Tier II – It has a minimum opening amount of ₹500 and allows withdrawals for up to 3 times in 5 years.
Employees Provident Fund (EPF) Salaried people and their employers contribute a fixed percentage to EPF every month till the employee leaves the organisation.
After retirement, one continues to earn interest on the deposit if the member has not withdrawn.
Atal Pension Yojana (APY) This retirement scheme guarantees a minimum monthly pension of ₹1000, ₹2000, ₹ 3000, ₹4000, or ₹5000 to poor, underprivileged, and unorganized sector workers who reach the age of 60 and have subscribed to this scheme. Upon the policyholder’s death, the nominee will receive the policyholder’s pension corpus, accumulated till the age of 60 of the policyholder.
Senior Citizens’ Saving Scheme (SCSS) SCSS is a 5-year pension plan available only for senior citizens, which can be extended for an additional three years.
The scheme offers the highest post-tax returns among the other fixed-income tax products.
Life Insurance Investment Plans Unit-Linked Pension Plans (ULIP) are specifically designed for those looking for retirement pension plans. Upon retiring, they can withdraw one-third of the accumulated amount, tax-free. The balance must be used to buy an annuity plan, offering a regular but taxable pension.
Mutual Funds These are riskier private investment instruments and offer returns depending on market volatility.
For long-term retirement investment planning, you can invest in high-risk equity funds and low-risk debt funds, depending on your risk appetite.
Tax Free Bonds Their maturity period ranges from 10 to 20 years and offers attractive returns. People looking for a regular income during retirement should prefer this option.
Bank Deposits This is a trusted and traditional investment instrument that helps save surplus funds. You can invest in a Recurring Deposit (RD) or a Fixed Deposit (FD). Both plans are risk-averse and offer guaranteed returns. FDs offer attractive return rates and allow you to accumulate a significant amount by the time you retire.

Important Terms Related to Retirement Pension Plans

FAQs about Retirement Investment Plans

When should I start retirement planning?

The best time to start investing in a retirement scheme is now, no matter the phase of life you’re in. The earlier you start, the more retirement funds you can accumulate.

What does vesting date mean?

It is the date when the policyholder starts receiving the plan benefits or when the pension corpus is invested into an annuity.

Can I have multiple retirement pension plans?

Yes, you can invest in as many retirement pension plans as you want.  

Are there any tax benefits on retirement investment plans?

Yes, tax deductions up to a total of ₹1.5 lakh per annum are claimable under Section 80C, 80CCC and 80CCD.

What happens to the retirement pension plans after the policyholder’s death?

In most retirement schemes, the purchased/invested amount is handed over to the nominee if the policyholder passes away. While the payout of an annuity plan depends on the annuity option chosen by the policyholder while buying the plan.