Planning for retirement is one of the key goals of clients. They wish to have the same lifestyle after they stop working and do things that they like. In order to make sure that your clients don’t face any financial difficulties during retirement, they need adequate retirement corpus. Given below are 3 popular tools financial advisors can suggest their clients to plan their golden years:
- Mutual Funds
Over the last few years, several mutual fund schemes have been launched aimed at retirement planning. If you select a MF retirement plan for your client, the investments will be rebalanced automatically based on the client’s age. Another option is to opt for a mix of equity and debt MF schemes. These plans provide enormous flexibility to modify the client’s asset allocation according to the risk appetite and monetary objectives. Financial experts can additionally recommend long-term SIPs to multiply wealth over the long term and ensure worry-free retirement for their clients.
- Public Provident Fund
Commonly known as PPF, this is regarded as one of the safest choices by individuals to build a healthy retirement corpus. The minimum amount to be invested in PPF in a FY is Rs.500 whereas the maximum sum is Rs.1,50,000. Interest rate of PPF is set by the Government every quarter; therefore investors can expect some changes in returns.
PPF has a lock-in period of 15 years. But part withdrawal is allowed from the 7th year. The biggest benefit of this investment tool is that it is exempt from tax as per Section 80C of the Income Tax Act. Moreover, interest earned from PPF is tax-free.
- New Pension Scheme (NPS)
Under this scheme, investors can put in 75% of their corpus in equities. The remaining is invested in government securities or corporate bonds. Investors can either select the investments manually or opt for automatic rebalancing. Withdrawals from NPS attract no tax, thus if your client wishes to buy annuity from 40% of the total amount when he reaches retirement, the sum will be tax-free.