How to use mutual funds for retirement planning?

Everyone looks forward to their retirement where they can spend time with their family and friends and enjoy the golden period of their life. But for that, you also need to plan for staying financially stable. Retirement, for every person, has a different meaning but one thing that remains constant is the need to invest in a proper way. And mutual funds have come up as the new age of investment. But can it be used to plan your retirement? Read on to find out.

What is the role of mutual funds in planning your retirement?

When you have worked your whole life as a Central Government employee, most of the times everything regarding your retirement is already planned by the government. But if you are self-employed or working in the private sector, then the necessity of planning for your retirement even becomes bigger. So, whether you are a Government employee or not, some extra savings for that golden-period would never really hurt, will it? If any form of investment has the ability to beat inflation then it is the mutual funds, so if you want to invest, then you should definitely consider mutual funds for your retirement planning. Mutual funds are known to generate huge profits in the long run which make them very popular for retirement planning.

What are the benefits of retirement planning with mutual funds?

Now if you are going to plan your retirement period by investing in mutual funds, you ought to know the benefits as well –

· Fund Diversification — This is one of the most important benefits that you can enjoy. The basic functioning of the mutual fund concept is that they will take money from various investors and then invest the money in different individual securities. Thus, a great degree of diversification can be achieved which will never be possible if you had to do all of it on your own.

· More Flexible than Pension Schemes — The various retirement and pension schemed that are present have a certain form of rigidity. But with mutual funds, you can attain flexibility in your investment terms. You will not be imposed any terms on how much money you can withdraw at any particular time. You might also transfer funds from one policy to another at your own will and no one will stop you.

· High Transparency — The transparency of mutual funds is another reason why they are so popular. You can always access all your information at any time which is not possible with pension plans.

· Taxation Benefits — If you invest your money in equity funds, amounts up to 1lakh will not be taxable. The tax can be reduced to nil in case of debt funds because the tax is mostly levied after indexation.

Planning for your retirement is always advisable beforehand and it is never too early to start planning. You will also get to choose the mutual funds according to the objective you have in mind. The retirement calculator will make the process easier for you by finding out how much you have to invest to have a nice lifestyle even after retirement. retirement calculator