How to plan and invest in a retirement plan

How to plan and invest in a retirement plan?

October 23, 2023

Mutual funds offer various advantages to investors through investments for various durations– long, medium, and short. Retirement plans are popular long-term investments that help investors plan for life after retirement. Know everything about these funds in this article. 

Why are mutual fund retirement plans necessary?

Investors adopt different strategies to save for their retirement. One of the most efficient investment strategies for retirement planning is investing in a retirement mutual fund. These are mutual funds that have a long investment horizon. The primary objective of a retirement mutual fund is to create a stable source of income for investors post-retirement. Here are a few reasons why you must consider investing in a retirement mutual fund: 

  • Long-term investments can help you combat rising inflation by compounding wealth over time. 
  • Medical inflation, too, is on the rise. To access the best healthcare at an advanced age, you need to have the funds for it. Investors must consider retirement mutual funds for this need. 
  • Investors who work in the private sector must invest in a retirement plan to keep receiving a steady flow of income post-retirement. 

How to select mutual funds for retirement?

Now that you know the importance of retirement mutual funds, here are four steps to select an efficient retirement mutual fund: 

  1. Decide on a retirement corpus

You might find it difficult to estimate the amount required for daily expenses a few decades from today. However, you can arrive at a decent estimate by analysing your current lifestyle and accounting for inflation. Let us assume that your monthly expenses today are ₹1 lakh. Your monthly expenses a decade later would amount to ₹1.6 lakh, assuming an inflation rate of 5%. 

  1. Use an online retirement planning calculator

Next, you must recheck your calculations by using a retirement calculator. The one on ICICI Prudential’s site helps customers plan when they can retire based on their monthly investment amount until retirement. 

  1. Select a mutual fund

Also called “pension plans,” retirement mutual funds help investors grow their investment income over a long period. There are various options available within retirement funds as well. You can opt for a pure equity plan, debt plan or a hybrid plan for your retirement mutual fund. 

  1. Choose your mode of investment

How to invest in a retirement plan?” is a question asked by many, and there are two different ways to go about this. You can either choose a lump sum mode of investment or an SIP (Systematic Investment Plan) mode of investment. The former allows you to invest a substantial amount all at once, whereas the latter allows you to invest every month until the end of the investment period. 

You should know your risk appetite and desired investment corpus before investing in a retirement mutual fund. 

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