With the middle class expanding in India, experts are increasingly pointing out the importance of long-term financial planning. A part of this planning is ensuring a regular income post-retirement, to be able to relax and have a stress-free time. The earlier you start planning for your retirement the better it is, as the fund will increase in size. There are several investment tools that young people can use now to ensure they have a steady income when they no longer want to work.
These tools offer retirement benefits but you can choose the one which suits your needs.
1.National Pension Scheme
NPS is a low-cost tool to build a retirement corpus. It allows investors to contribute monthly, quarterly or annually. When you open an NPS account, you are given a unique Permanent Retirement Account Number (PRAN), which can be used across India. So if you move to another city after retirement, no additional procedure is needed. NPS contribution is tax exempted up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.
2. Unit-linked Insurance Plans
ULIPs are insurance policies that offer you the potential of wealth creation while providing the security of a life cover. A portion of the premium you pay provides you life cover and the other is invested in the market. A long-term investment plan, ULIPs also give you tax benefits under Section 80C. What's even better is that ULIP pay-outs are exempted from tax.
3.Senior Citizen Savings Scheme
A government-backed savings scheme that will help you plan for your golden days of life. This scheme offers high safety and tax-saving benefits. You can open an SCSS account at the nearest post office as you open it in any authorised bank.
4. Public Provident Fund
The PPF was introduced in India with the objective of mobilising small funds. It can also be called a savings-cum-tax savings tool that enables a person to build a retirement corpus. What makes it really attractive is that the interest and the returns are not taxable.
5. Rental Income
This investment requires a huge one-time investment as realty prices keep skyrocketing. But if a person can afford this one-time investment, it offers a regular income not just when you retire but as soon as the property is ready to be rented out. Also, the investment almost always appreciates with time.