Best Mutual Fund Schemes To Save For Retirement

Retirement is inevitable and so is the associated financial needs post-retirement. The funding of financial needs including regular expenses, medical bills, vacation, etc. that too with no or lower cash flows can create a huge financial burden on the individual in the retirement phase. That’s why it is very important to plan your retirement well in advance to avoid facing financial difficulties post-retirement. Nowadays, many individuals and investors have started planning for retirement in their 20s. Starting early helps to save the desired corpus for retirement well on time.

There are many different savings & investment options available that help in planning for the  retirement. Mutual funds have been increasingly becoming popular among investors for their high return potential especially on long-term investments. This makes them an ideal choice for planning our regular savings & investments through mutual funds for building a retirement corpus. In mutual funds too, there are many schemes that specifically have an objective of building a retirement fund through regular contributions by the investors. In this article, we have discussed the benefit of opting for retirement funds and have also discussed the features of some of the popular retirement mutual funds. 

Also, investors can consider investing in a diversified portfolio consisting of different sub-categories of equity or/and debt mutual funds depending on their requirements, risk tolerance, and current situation. A well-diversified mutual fund portfolio can also help in building a desired corpus for retirement through disciplined investments over the long term.

Benefits of Retirement plans

Some of the benefits of retirement schemes in mutual funds are mentioned below. Let’s have a look:

1. Retirement Corpus

Retirement plans help create a good corpus over the long term which can later be used at the time of retirement to meet the financial needs & requirements. Planning early for retirement can help the investor or individual to reduce the burden of expenses which will appear after retirement.

2. Disciplined investments

An investor can invest in a disciplined way for the long term. Investing regularly in a disciplined way through the SIP method of investment helps an investor to create a good corpus and earn stable returns with overall reduced risks over the long term.

3. Inflation-adjusted Returns

Retirement funds have the potential to give much higher returns than inflation rates. This helps to achieve good capital growth on your investments.

4. Different options in portfolio

Retirement funds offer a diversified portfolio along with different options of asset allocation. Like a mix of debt and equity securities with different weightages. It helps investors to choose the portfolio as per their risk and financial objectives.

Top mutual funds for retirement benefit:

1. SBI Retirement Benefit Fund:

SBI Retirement Benefit Fund, a fund of SBI mutual fund was launched in February 2021.  It is a retirement solution-oriented fund. The fund has 4 sub-plan which invest in debt and equity securities as per their objectives. All the sub-plan has a lock-in period of 5 years or till retirement age, whichever is earlier.

Different plans available under the scheme are:

1. Aggressive Plan 

The aggressive plan has an AUM of Rs. 394 crores as of 31st March 2021 and it has given the return of 4.67% since inception in February 2021. This plan is best suitable for the investors who have the potential to take high risk as this plan invests the majority of assets in the equity asset class. The plan can allocate 80%-100% of assets in equities while 0%-20% of assets in debt securities.

2. Aggressive Hybrid Plan

The aggressive hybrid plan has an AUM of Rs. 413 crores as of 31st March 2021 and it has given the return of 4.12% since inception in February 2021. This plan is best suitable for the investors who want to invest in equity asset class but along with debt asset class. The plan can allocate 65%-80% of assets in equities while 20%-35% of assets in debt securities.

3. Conservative Hybrid Plan

The Conservative hybrid plan has an AUM of Rs. 147 crores as of 31st March 2021 and it has given the return of 3.22% since inception in February 2021. This plan is best suitable for the investors who want to invest in debt securities but want a small exposure of equity securities. The plan can allocate 60%-90% of assets in debt securities while 10%-40% in equity securities.

4. Conservative Plan

The Conservative plan has an AUM of Rs. 130 crores as of 31st March 2021 and it has given the return of 2.67% since inception in February 2021. This plan is best suitable for investors who do not have a high-risk appetite and therefore want to invest predominantly in debt securities and conservatively in equity securities. The plan can allocate 80%-100% of assets in debt securities while 0%-20% in equity securities.

2. HDFC Retirement Savings Fund

HDFC Retirement Savings Fund, a fund of HDFC mutual fund was launched in 

February 2016.  It is a retirement solution-oriented fund. The fund has 3 sub-plan which invest in debt and equity securities as per the plan objectives. All the sub-plan has a lock-in period of 5 years or till retirement age, whichever is earlier.

Different plans available under the scheme are:

1. Equity Plan

The equity plan has an AUM of Rs. 1,392 crores as of 31st March 2021 and it has given the return of 17.53% since inception in February 2016. This plan is best suitable for the investors who have the potential to take high risk as this plan invests the majority of assets in the equity asset class. The plan can allocate 80%-100% of assets in equities while 0%-20% of assets in debt securities. The fund may give some exposure to units issued by REITs & InvITs and non-convertible preference shares.

2. Hybrid Equity Plan

The hybrid equity plan has an AUM of Rs. 577 crores as of 31st March 2021 and it has given the return of 16.08% since inception in February 2016. This plan is best suitable for the investors who want to invest in equity asset class but along with debt asset class. The plan can allocate 65%-80% of assets in equities while 20%-35% of assets in debt securities. The fund may give some exposure to units issued by REITs & InvITs and non-convertible preference shares.

3. Hybrid Debt Plan

The hybrid debt plan has an AUM of Rs. 115 crores as of 30th April 2021 and it has given the return of 8.83% since inception in February 2016. This plan is best suitable for the investors who want to invest in debt securities but want a small exposure of equity securities. The plan can allocate 70%-95% of assets in debt securities while 5%-30% in equity securities. The fund may give some exposure to units issued by REITs & InvITs and non-convertible preference shares.

3. ICICI Prudential Freedom SIP

ICICI prudential Freedom SIP is not a mutual fund. It is a well-planned product launched by the house of ICICI Prudential Mutual Fund. This product has an objective to fulfill the financial goals of the investors by offering a systematic plan for investments as well as withdrawals. 

Step 1: ICICI prudential freedom SIP gives an option to investors to select the mutual funds of ICICI prudential mutual funds. Do the monthly investment in the selected mutual fund for the predefined period of 8 years, 10 years 12 years, or 15 years.

Step 2: Select another fund for switching the investment after the tenure of the fund selected in step 1 is completed. 

Step 3: Once the investment is switched, an Systematic Withdrawal Plan (SWP) is activated, and the investors can make regular monthly withdrawals form the accumulated unit balance which can be used to meet their daily expenses, regular income, or as other needs of the investors.

Investors will get the monthly withdrawal as:

Frequently Asked Questions

• What are retirement funds?

Retirement funds are those solution-oriented mutual fund schemes which helps the investors to save for their retirement through disciplined investments over the long term. They have the potential to generate high returns on the invested capital and therefore can help in accumulating a desired corpus to meet post-retirement needs.

• What are the Top retirement funds?

There are many retirement funds available in India. Some of them are:

1. SBI Retirement Benefit Fund
2. HDFC Retirement Savings Fund
3. TATA Retirement Savings Fund

• Do the retirement funds have a lock-in period?

Yes, generally retirement funds comes with a compulsory lock-in period of 5 years or till the retirement age, whichever is earlier. Any investment made in these funds, cannot be redeemed before the completion of 5 years from the date of the investment. 

• Does the investment made in retirement funds give the tax deduction benefits?

No, the investments made in these funds are not eligible for any tax deductions. However, it will offer tax-efficient returns over long periods.

• How to invest in Retirement mutual funds?

To invest in retirement funds, you can simply download the ZFunds app and start investing with a few clicks.

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You may also WhatsApp us on 7217746224  to chat with our financial experts for free. Our experts will help you in selecting the best funds to invest in for retirement as per your requirements.