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How To Plan Retirement By Investing In Mutual Funds?


In the sunset years, no dobut what ever you have accumulated over the years may come in handy, but to meet or reach that decent amount you need to pay heed to a host of factors say for eg; asset allocation, rate of return, risk profile of the instrument plus the liquidity conditions.

How To Plan Retirement By Investing In Mutual Funds?

Nonetheless, while there are a numerous such dedicated schemes available in the market like the senio citizens savings scheme, other small saving schemes, Investors taking the mutual fund route can specifically prepare themselves for the retirement.

But for this to reach, you need to start planning retirement early as well as prudently with proper adjustments, and maintaning and alliging well with the overall retirement objective. It goes without saying,when there is a dearth of financial resources and too many a tasks at hand and liabilities you will have to do it by foregoing some of the other assets in your portfolio.

Rule of retirement income that makes use of 4 percent

The 4% withdrawal per se retirement is mandatory to understand, as it after taking into account the rate of return on an average basis and inflation, is of the view that by using the formula of 4% withdrawal, the retiree will be able to reach a portfolio amount which shall not decline to zero in the given period. Say after retiring, an individual accounts for his needs as Rs. 40000 per year than he needs a starting portfolio mi valued at Rs. 10,00,000.

Some best mutual fund classes to plan your retirement income

1. Balanced funds or asset allocation funds or hybrid funds: These funds invest across a set of assets that range from equity to bonds to money market instruments. And typically offer to provide capital safety based on the defined purpose. As per your risk profile if you can choose between moderate or aggressive risk portfolio.


2. Fixed Income funds: Through this category of fund, an investor can gain a stream of predictable as well as stable returns over a period of time by betting on asset class that carries relatively low risk.

Here in the portfolio comprises CDs, money market funds, bond mutual funds and different annuity types.

3. Dividend paying mutual funds: The dividend amount can come in handy to meet the regular cash flow needs during the retirement. Here in the mutual fund companies invest in stocks that give out dividends. And these can be put to use as per the investors investment horizon and objective.

4. Retirement plans under solution oriented scheme: Now a more specific category catering to the retirement needs has evolved after the recent mutual fund categorization, the scheme is said to have compulsory lock-in of 5 years or till the retirement age which ever happens to fall sooner.

The scheme though remains a better bet for first time direct investors who can through the mandatory lock in can avoid the market risks. Also, the portfolio shall not be extremely aggressive. But the disadvantage that comes up with these plans other than the lock-in, is the investor cannot switch between schemes even in a case when the fund performance is lagging the benchmark index by huge points.

Compounded returns and SWP for retirement needs

Systematic withdrawal plan can be chosen for any of the plans in the distribution phase to meet the regular cash flow needs for different expenses at the retirement stage

Story first published: Wednesday, June 20, 2018, 16:07 [IST]
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