Why there is a Retirement Crisis in India?
In India, we do not have any social security system in place. Except in the case of government employees, there is no pension system. Although employee provident fund is available for both government and private sector employees but still there are many companies in India which are not following the rules. All these things leave little in the hands of the people for their retirement.
Hence, people have to resort to ways in which they can create retirement corpus for themselves.
How to Create a Retirement Corpus?
EPF - Employee’s Provident Fund or EPF is the most popular retirement saving instrument in India. Interest earned on the EPF savings is tax free and withdrawal is also tax free, if there is a continuous service of at least five years. This makes EPF a very popular medium to create retirement corpus for yourself.
Equity Investment – one common thing between retirement and equity is that both are done for long run. Retirement comes after the end of professional life and equity gives the maximum return in the long run. So, investment in equity can help create huge sum of money as retirement corpus.
Investments in Bonds – Bonds are generally considered to be risk free in nature, as the money invested in bonds is put in places which assure guaranteed returns.
Post Retirement Investments Options
Monthly Income Schemes - Post retirement, you would require schemes which provide regular income for you. Such schemes are popularly known as Monthly Income Schemes (MIS). Various mutual funds provide these in the form of funds. Post office also provides MIS.
SCSS - Senior citizens saving scheme (SCSS) gives an interest of 9.2% p.a with a maturity period of 5 years. Senior citizens saving scheme account can be opened in post office or in any nationalized banks.
Pension Plans - Pension plans are provided by insurance companies as well as mutual funds. If you make investments in pension plans than you will get monthly pension from the insurance company or the mutual fund company after your retirement.
Liquid Funds and FD - Liquid funds are the funds which are readily liquid able i.e. money invested in the liquid funds can be withdrawn at will. Whereas fixed deposit locks your funds for a certain period but you anyways have an option, of how to take interest earned on the fixed deposit. It can be monthly, quarterly, half yearly or yearly.
Conclusion
These are the retirement products available for investment in our country. Ideal time to start saving for retirement would be 1-2 years after you get your first job. If you have not started yet, it is time to start now.
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