Retirement planning is one of the key aspects of personal finance but many of us don’t pay much attention to it. To put it into perspective, Money9 Wallet Survey revealed that 73% of the respondents have not even invested for retirement. Not planning retirement can cost dearly at old age as inflation eats into your savings. So, the sooner you start investing, the better off you’d be when you retire.
APY vs NPS
These are government-backed pension schemes. Atal Pension Yojana (APY) primarily targets unorganized sector workers, who save less. If you’re 20 years old and start investing as low as Rs 50 a month in APY for 40 years, you’ll get a monthly pension of Rs 1,000. APY subscribers can get fixed monthly pension of Rs 1000, Rs 2000, Rs 3000, Rs 4000 and Rs 5000. The amount of premium depends on the age of entry.
NPS on the other hand was launched in 2004 only for government employees and later extended to private sector workers also. At retirement, NPS subscribers get 60% of their pension as lump sum, while remaining 40% is paid out as annuity.
Should you invest in mutual funds to meet retirement goals?
Besides the above mentioned pension plans, mutual funds can also help you save for retirement. You can invest in equity, debt or diversified funds based on your risk appetite. If you are not good at fund selection, there are many retirement funds like Axis Retirement Savings Fund, HDFC Retirement Savings Hybrid, ICICI Pru Retirement Hybrid, that give you a chance to benefit from the equities, said Arnav Pandya,Founder, Moneyeduschool. You can invest lump sum or via SIPs. Even while withdrawing, you can either go for a lump sum or pick a systematic withdrawal plan which works just like annuity.
In this video, Moneyeduschool’s Arnav Pandya, tells us how to choose the right pension plan
