Planning for Retirement? Here Are the Best Mutual Fund Options for Your Needs

Planning for Retirement? Here Are the Best Mutual Fund Options for Your Needs

Feb 16, 2018

Retirement planning is a crucial financial goal that every working professional should envisage early on in life. With an enhancement in the life expectancy of people owing to unprecedented development in the field of medical science and an increased awareness regarding nutrition, a considerable amount of fund is needed at hand by the time you retire, to meet all post-retirement expenses. Starting early is important because this way you will have number of years at your disposal to make investments, as compared to the number of years you would be required to expend post-retirement.

Mutual funds are an amazing investment option for long-term planning such as retirement. And the reasons are numerous- one being that they are extremely low-cost. Another important reason is that they offer both tax-free (equity) and tax-efficient (debt) investment options. What more? You get transparency as well as liquidity.

If you think just as your smart peers do, you will probably understand that investing in mutual funds can offer amazing long-term benefits. But before you say ‘yes’ to them and zero in on any investment plan, here are a few pointers to keep in mind -

  • Never go for a mutual fund retirement plan characterized by high expenses. An unfavorable expense ratio can increase the internal costs by a great margin.
  • Choosing the plan as per your needs is extremely important. You are generally exposed to two options- create a mixed and matched portfolio best suited to meet long-term financial goals or directly go for dedicated retirement schemes. Both have their own upsides and downsides and should be evaluated closely as being decisive.
  • Many people take a lot of time in deciding which retirement mutual fund to go for, whereas the amount of time they spend making retirement plans is negligible. Retirement plans may include decisions such as how to take the pension income when to take social security and tax planning. When sufficient time is spent making these other retirement decisions, they offer you more value than choosing a mutual fund scheme. And that is why experts say, you should first make plans regarding your retirement and then go after retirement schemes.

Now, let’s tell you about some of the best performing mutual fund retirement investment plans available in the market. The options have been chosen not just on the basis of their performance but also their nature in general. You shouldn’t, however, blindly go for these schemes. You may like to make sure they are best for your age, before investing in them.

Table: The top-performing mutual fund schemes for retirement planning

Source: Swaraj Wealth Research

UTI - Retirement Benefit Pension Fund -

It is a balanced fund of the open-ended nature. While 40% of the invested amount goes to equity funds, a considerable 60% reaches debt funds. This fund, especially aimed at self-employed people becomes a source of pension after the investor attains the age of 50 in the form of periodical cash flow till the repurchase value of their holding is reached. The withdrawals can be made under the systematic plan.

Franklin India Pension Plan-growth -

It is a government notified pension scheme that provides tax benefits to investors under section 80C. With a lock-in period of 3 years and an investment cap of 1.5 lakh, it sure figures in the list of desirable pension plans. While 60% of the funds are invested in equity, the rest 40% goes directly to debt funds.

Analyzing the table, we see that while the first year’s return percentage is higher for ‘UTI- Retirement Benefit Pension Fund,’ ‘Franklin India Pension Plan-growth’ takes over in the third and fifth year. The tenth year return percentages are 9.79 and 9.67 for ‘UTI- Retirement Benefit Pension Fund’ and ‘Franklin India Pension Plan-growth,’ respectively. Although UTI is a clear winner over the long run, the return percentage since launch is higher for Franklin India’s scheme.

One thing that may clearly be inferred from the table is that there is no vast gap between the performances of these two pension schemes as both offer comparable results.

So, the bottom line is- the mutual fund is a great investment option for people looking to make long-term investments to meet post-retirement needs. And because the corpus they help you build over time is sizeable, they are a far better investment choice than routine PPFs, EPFs, and fixed deposits.

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