5 Reasons How Mutual Funds Make Your Retirement Secure

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Mutual funds for retirement
Mutual funds for retirement

5 Reasons How Mutual Funds Make Your Retirement Secure

 

It’s a fact that sooner or later each of us would have to plan for our retirement!

 

The major concerns of life after retirement are income, safety and maintaining one’s lifestyle. Because it is hard to say how long would you live and how healthy will you stay, how expensive the lifestyles will get, and how would you manage your funds then. Solution to keep the post-retirement worries at bay is to begin investing now. When thinking retirement mostly people jump on to pension plans, but investing in mutual funds with an aim to save for your retirement can fetch you many benefits and can also get you tax benefits.

In order to have a sound plan that matches your requirement you must clearly define them first, such as when is your requirement due? What is your age and current income? What are your household and current lifestyle expenses?  How much of your earnings would you like to put aside for your future? Do you have lump-sum surplus to park in investments or would you be comfortable do so monthly? What is your risk profile?

Once you have your requirement precisely stated you can then explore and evaluate all potential asset classes like Pension Funds, Endowment Policies, Fixed Deposits or investment in asset like real estate etc. There are several benefits of investing for retirement with mutual funds, some of them being as follows:

 

1).  Flexibility

When you need your money you can redeem it (unless there’s a fixed tenure). Such is the flexibility that mutual funds offer.

 

2).  Diverse Schemes

There are several mutual fund schemes, which can be chosen based on one’s financial goals and risk taking abilities. Retirement is generally a long-term objective, hence it would be appropriate to go for equity mutual funds or hybrid funds that offer a mix of both equity and debt.

 

3).  Capital Appreciation

Retirement calls for long term investments and in that case equity base funds work efficiently and have the potential to provide healthy long term capital appreciation. Also, tax benefits are an added advantage in case of equity funds.

 

4). Invest Systematically

For investors who have small corpus to invest regularly, mutual funds allow SIP (Systematic Investment Plans). SIP disciplines investment and keeps it organized, without burdening the investor to contribute much. Investors are advised to begin early to allow the amount to compound and grow.

Also Read:

How to select good mutual funds?

 

5). Ease of Transferring and Withdrawing

As you near your retirement age, you’d require to shift your investments to safer avenues to ensure steady and safe returns. Because gradually your risk appetite will fall to nil, hence mutual funds allow you the facility to switch your funds into a different scheme under the same fund house. A Systematic Transfer Plans (STP) allows the same. Likewise, if you require your funds back on regular basis, Systematic Withdrawal Plan (SWP) allows automatic withdrawal of specific amounts on regular basis which can range from monthly/ quarterly/ half yearly to yearly basis. It ensures you have regular income in your hand whereas the balance amount fetches you decent returns as the same time.

 

About the Author:

Having varied interests and diverse knowledge, Himani Arora writes articles for several sectors and categories in personal finance, mutual fund India  and investments for reliancemutual.com