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Investment Guide

Should Millennials Already Be Planning for the Retirement Funds?

Should Millennials Already Be Planning for the Retirement Funds?

Since retirement is still a good 20 to 35 years away if you’re a millennial, it’s understandable if you think it's too early to start investing religiously. However, with aggressively soaring living costs, maintaining a comfortable lifestyle during retirement can become near impossible if you don't start investing now.

Besides, with diverse financial instruments crafted for millennials, retirement planning will only claim a small chunk of your annual salary. So, planning for your future while paying today is the right thing to do.

Additional Read - 5 Rules For Millennials To Follow While Doing Financial Planning

Top 4 financial instruments for millennials to retire in style 

Investing in your 20s and 30s offers a two-fold benefit. Firstly, it gives you ample time to build a diverse financial portfolio. Secondly, you offset any losses you incur by investing in high return and risk instruments, given your long investment horizon.

Keeping this in mind, here are 3 millennial investments for retirement.

1. Mutual Funds (MF)

MFs offer a safe and lucrative avenue to indirectly invest in the stock market. This instrument offers a much higher return than many conventional savings instruments such as fixed deposits (FD). While you must also have a few FDs, supplement them with the right mutual funds as they offer substantial capital appreciation.

Creating an MF portfolio for retirement means choosing between debt, equity and hybrid/ balanced mutual funds that have a long maturity. The MF economy also offers special retirement MFs that come with a minimum lock-in of 5 years.

As a young investor, it’s ideal to diversify your corpus in both debt and equity MFs. The more you diversify in MFs, the higher your chances of return by the time you retire. Moreover, with such a long investment horizon, you’ll largely offset the risks associated with certain equity funds while relishing great returns.

2. Investing in MF through Systematic Investment Plans (SIP) route:

This investment vehicle allows you to invest in MFs in a disciplined manner. You can start a SIP with only a few hundred rupees and earn significant returns on it over the long term. What's more, you can define the intervals - weekly, monthly, quarterly, or annually, at which you want to invest. SIPs allow you to invest a fixed amount at desired intervals and take advantage of rupee cost averaging. 

A reasonably safe instrument, systematic investment plans let you earn a lump sum amount through the power of compounding over a long duration. This makes them an excellent choice for retirement planning.    

3. Public Provident Fund (PPF)

PPF is a long-term investment instrument that offers a substantial guaranteed rate of return at an initial lock-in period of 15 years. We know this initially sounds like a lot. But, once the lock-in is over, you are eligible for partial or full withdrawal, that too, without paying any tax.

Moreover, you can deposit as little as Rs. 500 every year and go up to Rs. 1.5 lakhs annually. You can also claim a tax rebate of up to Rs. 1.5 lakhs deposited in your PPF every year.

4. National Pension Scheme (NPS)

Build your retirement corpus by depositing a small amount every month or year in the National Pension Scheme. Not only does this instrument provides a substantial rate of return, but the money you receive at maturity (60 years of age) is also entirely tax-free.

What's more, you can also choose a pay-out plan, on superannuation (60 years of age) one has the option to withdraw a lumpsum amount up to 60% of the total corpus invested and for the balance 40%, annuity has to be purchased which would provide a regular monthly provision.

Additional Read - How Millennial Spending Patterns are Different from Their Parents

Long story short

Are you looking for a reliable digital portal to sort out your retirement investments? If yes, then turn to Tata Capital Moneyfy. Through our website, you can invest in various instruments, including MFs and SIPs.

Simply visit our website, and create an account to get started. You can also download the smartphone Moneyfy app to invest for your retirement on the go.

Reach out today!

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