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Retirement planning is of crucial importance to every individual. The break-up of traditional families makes it imperative for every person to be financially prepared for a long and fruitful life.
Unless a timely savings plan is worked out well in advance, the going becomes tough as old age creeps in. So what are the different options that offer succour to the retired?
A number of noteworthy savings schemes vie for investors’ attention. The recently popularised National Pension Scheme (NPS), courtesy the Pension Fund Regulatory and Development Authority (PFRDA), is a useful means for building a retirement kitty.
INTERESTING OPTIONS
A minimum sum of Rs 6,000 a year is acceptable in a personal NPS account. One has to contribute to the account till he turns 60 years of age. The accumulated amount accrues interest at attractive rates.
On turning 60, the account holder is entitled to receive 60 per cent of the fund value and has to farm out the balance 40 per cent to buy annuity, from one of the approved fund managers empanelled with PFRDA. The Government by bringing in the NPS has done a great service for to the countless multitude, bereft of a public service pension.
Insurance companies offer attractive annuity and pension plans, that seek to invest a lumpsum amount and provide the annuitants with periodic payments for life. The added advantage here is the concomitant insurance coverage that comes at no extra expense.
Should the insured die in the vesting period of the annuity, his nominee stands to receive the sum assured plus the accreted bonuses in the account. The one main disadvantage of the annuity insurance scheme is that a huge outflow of money is called for, unlike the sizeable and calibrated contributions to schemes like the NPS.
A third option for twilight saving is via pension schemes peddled by mutual funds. Though mutual fund investments are fraught with market risks, the long-term horizon available to build and foster wealth, evens out the sharp falls associated with equity and other risky asset classes.
PORTFOLIO MIX
Moreover, you can further average out systemic risks through the means of SIPs, or systematic investment plans. These seek to collect regular contributions, involving rupee cost averaging, which is basically, buying more fund units when the chips are down and less units as the markets turns bullish.
Funds that invest in G-secs, rated fixed income or corporate bonds, do generally deliver the benchmark rate of return or more. By choosing, any of these separately or jointly, in a judicious mix of debt and equity, one can certainly hope to beat retirement blues.
(The author is a Kochi-based independent consultant.)
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